Yesterday, I learned of yet another example of the advance fee bank commitment scam, in which fraudsters victimize businessmen who need a bank loan to launch a new venture, and end up poorer for the experience. it might be instructive to detail this type of fraud, so that when a bank client of yours brings it up, you can explain how this version of the advance scheme works, and hopefully persuade him or her from participating.
Here's the usual fact pattern:
(1) A business that needs capital, generally in the form of a bank loan, learns about a financier who is a funding source.
(2) the individual guarantees that he will be able to obtain a bank commitment letter for the victim, though there will be an advance payment for the document.
(3) The advance fees are paid,and a bank commitment letter is delivered.
(4) The commitment,unfortunately, has such onerous terms, or is so time-sensitive in its requirements, that the victim can never adequately and completely fulfill them in a timely fashion.
(5) Alternatively, at the eleventh hour, the fraudster advises that an additional requirement has been imposed by the bank. These new terms are impossible to comply with.
(6) Whether (4) or (5) is the stated reason, the victim is declared in default of the commitment, and he or she does not get the funding. The fraudster keeps the advance fee.
I have seen the advance fee as high as ten per cent of the amount needed, which in some cases can represent a large amount of money in a multi-million dollar loan. You may have seen my articles last year, discussing the advance fee scheme perpetrated by a corporation called Atlantic Rim Funding Inc.; Feel free to refer to that case, should you wish to see an actual example of this type of fraud.
The bottom line: one should never advance any "fees", in order to obtain financing. Any reputable lender will deduct its costs and fees at the closing of the loan transaction. Do not get roped in to any advance fee scheme, lest you be not only without funding, but also without the deposit.s