'They're despicable': Consumers warned of illegal advance-fee loans during pandemic

Online money fraudsters are ramping up an old scam, luring struggling Canadians in the COVID-19 era with bogus loans that lead to more financial woes, CBC News has learned.

Terms such as 'credit protection' disguise charges that aren’t legal, BBB says

Jessie St-Cyr, a media relations officer for the Better Business Bureau, says scammers are taking advantage of the financial uncertainty caused by COVID-19 to target Canadians who are strapped for cash. (CBC)

Online money fraudsters are ramping up an old scam, luring struggling Canadians in the COVID-19 era with bogus loans that lead to more financial woes, CBC News has learned. 

"Scammers are taking advantage of the pandemic because they know that a lot of Canadians right now — and in the weeks and months from now — are going to be strapped for cash," said Jessie St-Cyr, a media relations officer for the Better Business Bureau of eastern and northern Ontario and the Outaouais. "They are going to be looking for loans."

The Better Business Bureau is warning consumers to stay away from "advance-fee loans," which require consumers to pay money upfront before receiving any funds. These fees are illegal in North America.

"You should never pay upfront fees, no matter what name they call it," said St-Cyr.

Companies sometimes use terminology such as "administration fee" or "credit protection" to disguise the illegal charges, she said.

"It's just a nice name they give for an advance fee. And it's not legal whatsoever in Canada to ask for any type of fee before receiving your money."

St-Cyr said Canadians are being enticed by these "advance-fee loans" because they often offer rates that may be higher than banks but much lower than short-term payday loans, which are allowed to exceed the legal limit of 60 per cent, or longer term instalment loans, which can reach an annual percentage rate (APR) of 46.96 per cent.

Advance fee loan scams are tracked by the Better Business Bureau. In Canada, it’s illegal to charge an advance fee as a prerequisite to getting a loan. (Better Business Bureau)

An advance fee of $1,000 or more may be worth the price if it saves on interest costs, they reason. And they're told the money will be reimbursed after they prove they can make regular debt payments.

Instead, once the advance fee is paid, the lender most often disappears. 

"They're unreachable," said St-Cyr. "When they disconnect their phone line, when they don't return your emails, when they disconnect their websites, it's impossible to get your money back.

"They don't transfer the loan. The person who has financial issues and needed the loan is in even more financial trouble after that." 

The BBB's ScamTracker reveals hundreds of complaints about advance-fee scams from across Canada, with consumers saying they have been scammed out of thousands of dollars by dozens of companies.

WATCH | A warning for consumers:

Warning for consumers

3 years ago
Duration 1:03
Better Business Bureau says lenders offering illegal advance fee loans often disappear.

That's what happened to an Ontario woman who says she lost $3,950 after sending it by e-transfer in March to secure a $20,000 loan to cover her debts and is in the process of going through a divorce. She isn't being identified because she fears her story could affect her job.

"I was desperately trying to ensure that my family's financial states were in order and that I could provide adequately for my children," said the woman, who found the website online while searching for financing options.

The Ontario woman shared a copy of the loan agreement sent to her by Belford Capital Service, based in Ottawa, according to the company letterhead. The contract states: "When your credit protection payment(s) have been received your loan will be released within one-two hours and available in your account."

It also says the credit protection "will be fully refunded after eight-12 monthly payments on time."

Although the woman said she was leery, the representative with whom she spoke on the phone convinced her to move forward with it.

This Ontario woman, whose identity CBC News is not disclosing, says she lost nearly $4,000 to an advance fee loan scam. (CBC)

"This guy was very good and seemed like he had a very strong financial background — he basically got around my walls and defences and made everything sound legit." 

'Taking advantage of the vulnerable'

The Ontario woman sent the "credit protection" payment — in two instalments — but did not receive the loan or the refund. Her telephone calls weren't answered and the company website has disappeared.

"They're despicable. They're taking advantage of the vulnerable," she said.

St-Cyr said people "who get scammed need to share their stories."

"There's no need to feel guilty or shameful. These guys are professional and they make it look like it's legitimate." 

In Vancouver last week, businessman Terry Tremaine was contacted via email by a company called First Capital Canada, which offered him a $20,000 loan. 

Terry Tremaine and his wife, Sari, run a dog daycare, but business has been down significantly since the pandemic began. (Dillon Hodgin/CBC)

"I went to their website to see if they were credible, and it all seemed pretty reasonable," said Tremaine, who says he also spoke with a representative and "they do a good job of presenting themselves."

Tremaine and his wife, Sari, run Best Barks Doggie Daycare, which opened in June 2019. 

"Business grew like crazy from when we started," said Tremaine. They moved into larger and more expensive rental space at the beginning of March, just as the COVID-19 pandemic hit hard in British Columbia.

Looking for options online

Revenue has since plummeted by 75 per cent, he said, while rent and overhead are constant. He's approached his bank for funding and is hoping for government assistance on rent, but said he also researched lending options online to help him cover three months' rent, or about $15,000. 

"It's the age of the internet, and I get all these emails," said Tremaine. "I had never seen that company before. How they got my email, I have no idea."

But he was intrigued, so he checked out the First Capital Canada website and then picked up on the phone. 

First Capital Canada offered Tremaine an unsolicited loan through email, but when he followed up, he was surprised to hear there would be a 'credit protection' fee of $2,900 before he could access the funds. (First Capital Canada)

While chatting with the First Capital Canada representative, he was sent a loan agreement requesting a "credit protection" fee of $1,950-$3,900, along with this clause: "When our credit protection payment(s) have been received, your loan will be released within one-two hours and available in your account." The representative told him he'd have to pay $2,900.

There was also the promise of a refund of the money "after eight-12 monthly payments on time."

'Didn't make a lot of sense'

Tremaine said he became skeptical right away. 

"It didn't make a lot of sense to me," he said. "And that was the end of the conversation." 

Tremaine did not sign up for the loan and instead called the BBB.

CBC examined the contracts from Belford Capital Service and First Capital Canada, and it appears the two entities are related or the same. 

Contracts from Belford Capital Service and First Capital Canada appear to show the two entities are related or the same. (Submitted by Terry Tremaine and name withheld)

The contracts are identical in style, language, clauses and demands for "credit protection" payments. 

The senior operating manager for both is identified as Donna Lewis, and the signatures are identical. Both companies indicate Ottawa locations but with different telephone numbers.

Both websites were registered this year in Panama. The Belford Capital Service was registered on Jan. 27, 2020, and soon afterwards, the Ontario woman signed up for a loan.  The website is no longer accessible.

First Capital Canada was registered on April 16, 2020, and Tremaine was contacted a week later. 

'Really taking advantage'

"I didn't realise it was so young. Wow!" said Tremaine. "These people are really taking advantage of the situation."

CBC attempted to contact both companies. 

Belford Capital Services was unreachable. 

First Capital Canada hung up twice and did not respond to an email inquiry. 

If consumers can determine when a website offering loans is created, it could be a clue regarding whether it is a legitimate entity.

"If you see the website was created in the past few weeks, the past few months, that's a big, big big red flag," said St-Cyr. 

She advises consumers to check out the registration dates of online lenders by going to and plugging in the URL of the lender. That will lead to a page showing the date and country of registration.

Still, it's rare that that police are able to track the people or organizations behind these fraudulent loans — although they have been successful in tracing the origin of other financial schemes, such as the CRA phone scam.

'Going on for a long time'

Still, tracking down the physical locations of these companies isn't easy, said St-Cyr, because they often use virtual offices. 

"This scam has been going on for a long time," St-Cyr said of companies offering advance fee loans. The BBB regularly charts and investigates such consumer complaints and has noticed an uptick.

"We are receiving calls every week, almost every day from people all over Canada. And what's worrying us is the economic situation that Canada is going through."

St-Cyr said it's "impossible" to know how many advance-fee loan operators are active in Canada because "the only thing we can calculate is the ones that are brought to our attention." 

WATCH | Better Business Bureau says advance fee loan scam on the rise:

Don't fall for this loan scam targeting Canadians during COVID-19

3 years ago
Duration 1:49
It's a time of financial difficulties for Canadians, but many who were searching for loans weren't expecting this unsolicited offer to wind up in their inbox. It looks legitimate, until they ask you to pay hundreds upfront to secure a $20,000 loan. It's called an "advance fee" loan scam. And the Better Business Bureau is warning Canadians that it's on the rise. Watch Makda Ghebresslassie's story.

She urges consumers to contact the BBB if they encounter an online lender who asks for payment up front but admits it is a difficult task keeping track of scammers.

"Once we get them flagged and then their website is deactivated, they're just going to create a new website a few days after and start their scheme all over again." 

Consumers need to do  their research, she said, and remember "to never, never, never transfer any money before receiving your loan"

Tips from the Better Business Bureau

  • Any upfront fee to pay before getting a loan is a "cue to walk away." 
  • Beware of loan guarantees before you submit any documentation.
  • Payments like e-transfers or wire transfers or bitcoin or payments to an individual are a "tip-off" to fraudulent activity.
  • Be suspicious of offers that tout lower interest rates — even if you have a bad credit score.
  • Pay attention to details, for example: office in one city but telephone numbers from elsewhere
  • Check out the registration dates of online lenders.
  • Check out the BBB's Scam Tracker, where you'll see complaints and the names of the companies alleged to have ripped off people. Click on the scam: "Advance Fee Loans" and select Canada and/or your province.
  • Report the scam to the BBB so that it can keep track and inform the public.

If you have information to share about this story or high interest lenders, please contact with your story and contact details.

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