What Are The Consequences Of Falling Into Fraudulent Loan Companies?

In 2020 alone, credit card fraud was the second most reported form of identity theft by fraudulent loan companies. Perpetrators of credit card fraud may face severe consequences, including hefty fines and extended jail time, depending on the severity of the crime and the amount of financial damage caused to the victims.

According to Intuit report, of the 1.4 million identity theft issues reported, there were 393,207 reported cases of credit card fraud, a 48% increase from 2019 numbers. You have to be vigilant when applying for a small business loan online as fraudsters become more sophisticated. This article digs into what you can do to avoid falling prey to online credit card fraud.

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Here’s how you can tell a legit online lender from fraudulent loan companies:

  • Contact Information/Location

A legal loan business has its contacts and physical address information available online; but most illegal ones do not. If you see one with a dubious address, run it through a maps app to verify the location.

  • Registration

State agencies register legal small business loan companies. You’re unlikely to find any signs of registration on an illegal lender’s website. Also, it’s safer to use a loan dealer registered in your state.

  • Refer to online Reviews

Yelp and Google reviews about loan companies can tell you if they are legal or not. Take note of customers who felt doubtful about a lender and do your due diligence.

  • Examine and Reexamine the conditions that come with the loan

An illegal lender will demand fees for loan approval, but a legitimate lender won’t. Legal financiers will refer to your credit history to approve or decline your personal loan application.

  • The Lender’s Behavior

When dealing with legal loan companies, you have ample time to consider your options. Illegal loan companies will try to pressure you into making the decision, which is a red flag.

Also Read: Transferring Money Online: Top 5 Myths & Facts Explained

Cases Of Financial Fraud

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These are some of the most prominent financial fraud cases throughout the years:

  • Bernie Madoff Fraud Scandal (2008)

A stockbroker, Bernie Madoff orchestrated the biggest Ponzi scheme in recent history. The 2008 financial crisis exposed the fraud, with investors losing more than $64 billion. Bernie got a 150-year jail term and owed $170 billion in restitution.

  • Enron Scandal (2001)

Enron Corporation was an energy giant that dominated the stock market in the 1990s. Its CEO, Jeff Skilling, and CFO, Andrew Fastow, engaged in accounting practices of fraudulent loan companies, making it appear profitable. That enabled them to continue raising capital. When it collapsed, shareholders suffered a $74 billion loss.

  • Lehmann Brothers Scandal (2008)

The 2008 global financial crisis unearthed fraud upon fraud, with the Lehmann Brothers scandal amongst the biggest. The investment bank used accounting loopholes to disguise $50 billion worth of loans as sales.

Also Read: The Significance of Forensic Readiness or Foerensic Compliance in Running a Successful Business

Significant Consequences Of Being A Victim Of Fraudulent Loan Companies

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These are some of the substantial consequences of fraudulent activities:

  • Financial Hardship

Fraud may leave you with financial hardship and with an inability to provide for your dependents. For older people and people with disabilities; that could be a matter of life and death as they will lose access to essential services.

  • Emotional Trauma

According to experts on fraud cases, the effects of fraud crimes on victims can have similar effects as violent crimes. Along with feelings of self-doubt, anger, embarrassment, and disbelief; falling victim to financial fraud can cause long-lasting depression, hyperventilation, rapid heart rate, and panic attacks.

Victims may also keep replaying the events that led to becoming victims of fraud. Eventually, it affects functionality and even ends up straining personal relationships.

  • Damage to reputation

Fraud has lasting effects on individuals and businesses, especially those in a position of authority. Since the copy may wipe out the victim’s accounts, they may not meet their financial obligations, hurting their reputation.

Due to the sensitive nature of some businesses, they can’t announce that they suffered from a fraud attack. That means they will suffer irreversible reputation dent as they try to sort out their financial issues.

Also Read: How To Prevent Website Hacking Attacks And Eliminate Its Consequences?


Knowing the signs of financial fraud or fraudulent loan companies is vital to tell a legit lender from a scam website. That’s because you risk suffering from reputational damage, emotional trauma, and economic hardship if you fall victim to financial fraud.

Follow the link in the opening section to learn more about a legit small business loan and avoid being scammed.

Also Check: How To Set Up A Merchant Account: Benefits Of Online Payment Solutions

Images by mohamed Hassan

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