3 Ways to Spot Lending Scams With the CFPB

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You don't have to fight fraud alone.

There are definitely times when it feels like you're on your own in the credit world -- like it's us against the big banks, with no one else on our side. But you do have one big ally in the fight for financial fairness: the Consumer Financial Protection Bureau (CFPB).

The CFPB was established in 2011 as part of the clean-up efforts following the housing crash and subsequent recession. The CFPB's mission is to ensure banks and lenders are obeying the rules and treating consumers fairly. In the words of the CFPB itself, "We protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law."

Of course, it's one thing to know there's an agency that's supposedly looking out for you -- and another thing to actually know how it's helping. For example, how can the CFPB really help you avoid getting caught in a scam by a shady lender? Let's take a look at a few real ways to make use of the CFPB before you're caught in a lending scam.

1. Make use of the Customer Complaints Database

One major part of the CFPB is its extensive Customer Complaints Database. The CFPB has been collecting complaints about financial institutions for years, and you can find everything from folks lodging complaints about credit reporting errors to specific issues with a bank or lender.

It's all too easy for banks and lenders to curate their online reviews -- especially with pay-to-play services that give them control over which reviews are shown. The CFPB, however, won't censor a complaint just because the bank is big and rich. You can search thousands of companies and read real complaints from customers. You can also see how the company responded, including any public comment offered by the company.

Most financial institutions will wind up with some complaints along the way, and the CFPB doesn't check the validity of every submission. But if you see a large volume of customer complaints about shady lending practices -- consider that a warning sign to look for another company.

2. Read up on the latest scams

Preventing fraud is one of the core tenets of the CFPB's mission. So it comes as no surprise that the Bureau offers a wide range of fraud resources to help consumers stay aware.

For example, you can read up on the latest scams to watch out for, and check out more in-depth articles on common types of fraud, like identity theft and credit card fraud. The fraud resources also include a glossary of common fraud-related terms, like:

  • Phishing: when a scammer impersonates a legitimate business to get your personal information
  • Spoofing: when a caller uses false credentials to commit fraud.

If you're concerned you've already been a victim of fraud, you may not know what to do next. The CFPB has resources for that, too, including simple guides on who to report to and what you can do to protect yourself from additional damage.

3. Educate yourself on the basics of credit and lending

It's much easier to become a victim of fraud or scams if you don't know how things are actually supposed to work in the first place.

The CFPB has a wealth of educational resources that describe the ins and outs of everything from credit scores to mortgage loans. You can find the basic information you need to ensure you're informed about what to expect during the lending process, as well as how to spot red flags.

There are also more in-depth tools and resources to help you along the way. For example, soon-to-be homeowners looking for a mortgage can find a number of useful mortgage tools like budgeting worksheets and sample loan estimates. When paired with other resources, such as a good mortgage calculator, you can head into the loan process better prepared for what you'll find.

Forewarned is forearmed

The most powerful tool any consumer can wield in knowledge. When you know what to expect -- and what to watch out for -- you're far less likely to fall victim to scams or financial fraud. Of course, it helps to have a powerful ally in your corner. That's where the CFPB comes in.

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