THE ATTORNEY GENERAL OF TEXAS
Ken Paxton

Loans

There are all kinds of loans: commercial loans, home equity loans, pay day loans, signature loans, pawn shop loans, auto loans, mortgages and many more.

 

Scams

So many types of transactions create lots of opportunities for scams. A key warning sign is if the lender asks you to pay them a fee before the loan funds. This is called an advance fee loan and it is illegal. Scammers requiring an advance fee often take the fee and disappear.

Another warning sign that you are dealing with a scammer is if they ask you to pay them using a wire transfer instead of using the mail. This allows them to circumvent mail fraud.

Many con artists work under company names that are similar or identical to legitimate lenders. For instance our office filed suit against an unscrupulous company which called itself City Mortgage Services. City Mortgage had no affiliation with Citibank or CitiMortgage. Because all lenders will require you to provide personal sensitive information, you need to be careful yours is legitimate. Otherwise you could become a victim of identity theft.

Unscrupulous lenders usually prey on people with poor credit. Beware of loans advertising low interest rates and guaranteed approval regardless of poor credit or bankruptcy. If you are considering a debt consolidation loan, or are attempting to borrow money in spite of poor credit history, contact the National Foundation for Credit Counseling or the Consumer Credit Counseling Service agency in your area.

 

Complaints

In Texas many types of loans are regulated by the OCCC. If your complaint is against a lender the OCCC does not oversee, the Texas Department of Banking may be able to direct you to who does. File complaints with the regulator who oversees your lender, and with our office.

 

Co-Signing a Loan

If you co-sign a loan for someone, you are responsible for the loan if the borrower does not pay. In fact federal law requires the creditor to provide you with a notice explaining that you must guarantee the debt. Therefore if the borrower does not make the payments, you are fully liable for the debt, just as if you had taken out the loan.

This means you will have to pay all the money that is owed including late fees and interest. You could also lose any assets you used to secure the loan. If the loan is in default and the creditor sues to collect, you could even be responsible for attorney fees.

Further if the creditor turns it over to a collection agency, the collector can pursue you by all legal means to collect the debt.

Finally, a cosigned loan could affect your ability to borrow. Other lenders will consider your co-signed loan as part of your total debt load if you apply for another loan.

If you co-sign for a loan ask the lender to notify you if the borrower misses a payment. Also keep important documents such as the loan contract and the Truth-in-Lending Disclosure Statement. You may have to obtain copies of these papers from the borrower as the lender may not be required to give you these papers.