AI-driven scams target borrowers: How to spot fraudulent lenders

If you feel like scams are becoming more specialized and prevalent, you’re in good company. It’s easier than ever for scamsters to create scams that are believable—especially with advancements in AI technology. 

Fraudulent lenders are among the most common targets, using fake loan offers to prey on borrowers looking for fast approval or low-interest deals.
We spoke with Ardalan Shojaei, Chief Credit and Risk Officer of Fig, about the recent fraud trends study. We also learned about how to spot scams and what to do if you suspect you’ve been targeted or even been the victim of fraud. Even though March is designated as fraud prevention month, the following tips and advice can help you protect your finances throughout the year—especially if you’re looking for a loan.

AI and fraud trends

AI has swiftly become a part of everyday life, and as AI tools become more sophisticated, it’s having a larger impact on fraud. The TD survey found that 75% of Canadians felt that AI advancements made them more vulnerable to financial fraud, and 85% were more concerned about fraud than they were five years ago.

A whopping 82% of respondents felt that scams are becoming progressively harder to spot, and 24% said they or a family member had been the victim of financial fraud or a scam in the past year. If these study results are alarming, it’s because Canadians are recognizing a growing financial threat.
Ardalan Shojaei said, “Fraudsters typically go toward the path of least resistance. For a long time, they were focused on directly targeting financial institutions to break through, create fake accounts, and extract money that way.” As a result, Shojaei has seen most of the big financial institutions make concerted efforts to protect themselves. But many are now targeting individuals directly, offering fake loans and credit products to gain personal information and steal funds.

Red flags of a fraudulent lender

“Unfortunately, now they’ve shifted into bringing on legitimate individuals and earning their trust.” Shojaei says they’re doing this by creating the appearance of legitimacy. Scamsters might steal contact details and photos of real financial experts and pass these off as their own, helping them gain trust from people they’re trying to scam. 

Let’s take a look at some red flags specific lender fraud:

• They create a sense of urgency (e.g., act now or miss out on this loan)
• They offer guaranteed approval
• They ask for fees upfront
• They’re vague about loan terms
• You can’t verify that they’re registered to operate in Canada
• They’re poor communicators
• They immediately start asking for personal information
• The offer sounds too good to be true
  

According to the Canadian anti-scam coalition standagainstscams.ca, scamsters prey on your emotions. They contact you and often create a sense of urgency, fear, aggressive authority, or a limited-time opportunity. All of these can generate intense emotions that can make it harder to think clearly.

Remember: If something sounds too good to be true, it probably is.

For instance, a scam might start when someone is approached online about an exciting investment or loan opportunity. In fact, investment scams are one of the biggest recorded dollar impact frauds, as reported to the Canada Anti-Fraud Centre, with almost $700 million per year lost—and since only about 5% to 10% of scams are actually reported, the amount stolen is likely much higher.

How to protect yourself from fraud

If something about your interaction just doesn’t seem right, remember to stop and think. Don’t allow yourself to be rushed into making a decision you might later regret. 

Before you continue to communicate with the person/lender/organization, do a little digging. You can look up the organization on the CSA’s website to see if they’re legitimately registered to operate in the country. 

Sometimes, scamsters call and say they’re from your bank. If this happens to you, hang up and immediately contact your bank. Never provide your personal details without verifying who you’re talking to, and don’t let them pressure you into making a quick decision. Always verify that the lender is registered federally or provincially, and ask for a written contract outlining the loan terms.
Hopefully, you’ve avoided a scam, but there’s still more you can do: tell your friends and family about how you were approached. This can help them avoid being victimized, too. It’s also a good idea to monitor your credit cards, bank statements, and credit reports, if you’re not already doing so. Look for unauthorized charges or accounts you didn’t open, so you can report them.

AI as both risk and safeguard
It’s common for financial institutions to use large language models (LLMs) to screen for risk and signs of fraud. For instance, a bank might analyze a client’s loan applications or personal banking transactions to potentially identify suspicious patterns. They can then alert clients if they might be the target of a scam.

What to do if you’re the victim of a loan scam

If you suspect you’ve been scammed, you might be financially and emotionally invested, which can make it hard to know what to do. 

First off, slow down. “When it comes to money matters, stop and think,” said Shojaei. It’s natural to feel embarrassed, but, he says, “You’re not alone. These are trained professionals—a lot of the time, they’re organized criminals.”

If you suspect you’re being scammed, gather all of your communication with the scamster and report the scam to the Canadian Anti-Fraud Centre, your local police department, and your bank. This might seem excessive, but informing all these institutions can help them track trends, find scamsters, and prevent future scams.

Don’t forget to notify your credit card issuers and change your financial passwords. It might also be smart to place a note on your TransUnion and Equifax accounts stating that you were the victim of a scam. This can prevent scamsters from opening new lines of credit in your name.
Next, get support from friends and family. Effective scamsters isolate their victims, so it’s important to reach out. “Tell friends and family rather than feel shame because you’re also helping others get education and protect themselves,” said Shojaei. If a fraudulent loan or other scam has already caused financial harm, contact a nonprofit credit counselling agency that can help you create a personalized financial plan.

You might like you’re the only one being targeted, but you’re not alone. These websites offer resources that help you identify or recover from fraud:
Canadian anti-scam coalition
Equifax identity theft education
TransUnion fraud victims assistance
Ontario’s spot the scam guide
Fig’s guide to avoiding fraud

The bottom line

“Increasingly sophisticated AI tools have helped increase the scale with which scamsters can act, but at the end of the day, scamsters really prey on fundamental human trust and emotion,” shared Shojaei. Stopping to think, checking whether a lender is legitimate, and talking with others are the best things you can do to spot fraud.

Read more about fraud and scams:

• How to protect your small business from fraud
• How to protect your email account from scams and fraud
• How to protect your social media accounts from fraud

The post AI-driven scams target borrowers: How to spot fraudulent lenders appeared first on MoneySense.