Issue Date:  -  Wednesday, 17 October 2001

Pay-up-Front Could Leave You High-and-Dry

Consumer Protection Commissioner Patrick Walker has warned people to be on their guard when entering into pay-up-front loan agreements.

Mr Walker said the Department had received complaints after an advertisement appeared in The West Australian newspaper offering business loans at a low rate of interest and without security.

"People responding to the offer were told money was available but were asked to pay an up-front fee that was dependant on the amount of money being borrowed," Mr Walker said.

"When the contact person was questioned by prospective borrowers about his legitimacy, he reportedly terminated the meeting or the telephone call. It is this conduct that has prompted the Department's warning."

"In the present economic climate, people need to be aware that there are individuals out there capitalising on other people's vulnerability," Mr Walker said.

Mr Walker advised that it was very unusual to pay upfront fees when negotiating a loan as fees were normally built into the loan contract. He said consumers should be especially wary if fees are being demanded to establish a loan.

Additionally, consumers should be completely satisfied with the authenticity of the company, its product or service and they must make sure they receive documentation that clearly states the conditions and obligations of all parties involved in the contract.

"Be wary of any offer of low interest rates in the absence of you providing security to cover the loan. Deals that sound too good to be true usually have a catch," Mr Walker said.

"If you are in doubt or have even the slightest suspicion, then refrain from the deal and either seek legal advice and/or bring the matter to the notice of the Department of Consumer and Employment Protection by telephoning our Call Centre on 1300 30 40 54."