3OYS: Beware of upfront fees for small loans

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By Christina O'Haver By Christina O'Haver

PHOENIX -- George Dean does things the traditional way. For instance, he likes to read the newspaper.

And the one he likes is The Arizona Informant, which targets African-American readers.

"In the regular newspapers, you don't see anything about black history or anything like that," Dean told 3 On Your Side.

And like other newspapers, The Arizona Informant has a classified ad section. It was in this section that one advertisement in particular caught Dean’s eye. It was for a loan.

Dean said the ad indicated that he could receive a loan for bills or personal debt regardless of his credit history.

And Dean needed some extra cash, so the ad hit home with him.

"I was going to be moving, and I was going to try to see if I could get me like a little cheap car that I can get back and forth to work in,” he said.

So, he dialed the number in the ad and followed the instructions given to him.

"We have to send you some paperwork,” he remembers the lender saying. “So, when I received the paperwork, I filled it out and faxed it back to him. He said, 'You have to send $175 for insurance to make sure that we know that you're going to pay on the loan.' "

The paperwork came from a company called Soft Finance based out of San Francisco. The company sent Dean a contract for a $1,500 loan.

“I gave them my bank and routing number," Dean said.

However, after Dean provided all of the information and returned the paperwork along with his $175 fee, the $1,500 loan never arrived.

Dean said he was worried and became more concerned when additional money was demanded for the loan to be deposited directly into his account.

"I got a call from another source with these people saying I've got to send $150 more if I want it sent to my checking account," he explained.

Feeling something wasn't quite right, Dean demanded his money be refunded and told Soft Finance to forget about that loan.

“ 'Just send me the $175 back, please,' I said. 'Send it today,' " he recalled.

3 On Your Side looked into Soft Finance and discovered a company with that name has an "F" rating with the Better Business Bureau.

We also discovered that the phone number listed on Dean’s documents matches the phone number of a Seattle lending company that's not even in business anymore.

3 On Your Side also reached out to the California Department of Business Oversight. That agency should be familiar with Soft Finance because it protects consumers and oversees businesses engaged in financial transactions like these.

However, the agency says there is no record of a licensee by the name of Soft Finance.

Dean says here he was looking for money and now he finds himself out of money.

"Be very careful, leery of different places where you see advertising of things like this," he warned.

Dean's right. 3 On Your Side reminds you that you should usually never have to pay money up front in order to get a loan. Legitimate lenders make their money on the interest they charge you for borrowing money, so paying up front is usually a red flag.