NCUA LETTER TO CREDIT UNIONS

**NATIONAL CREDIT UNION ADMINISTRATION**

**1775 Duke Street, Alexandria, VA**

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  **DATE: August 2003**               **LETTER NO.: 03-CU-12**

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**TO: Federally Insured Credit Unions**

**SUBJ: Fraudulent Newspaper Advertisements, and Websites by**

**Entities Claiming to be Credit Unions**

The National Credit Union Administration has become aware of fraudulent
lending schemes by entities/persons representing themselves as credit
unions in newspaper advertisements, and/or on fraudulent websites.
Fraudulent advertisements have thus far appeared in newspapers in
California, Colorado, Iowa, Missouri, Ohio, Pennsylvania, and Washington
State. Fraudulent websites appear worldwide on the Internet and have
mimicked federally-insured credit unions operating in Georgia, South
Carolina, and Missouri.

The advertising fraud begins with an advertisement placed in local
newspapers purportedly by a credit union to assist customers with credit
problems. The advertisement states that the credit union can assist with
credit related problems by offering auto loans, personal loans, debt
consolidation loans, and home equity loans. The advertisement solicits
persons to speak with a loan officer for a free consultation by calling
an 866 toll free number.

Despite appearances, there is no legitimate credit union. This is simply
a ploy to have victims make an advance payment for a non-existent loan.
The victim is directed to make the advance payment via wire transfer
through Western Union. In addition, as part of the loan process, the
victim receives what appears to be a valid loan application that
requests personal and financial information. This information may be the
basis for further fraud, including identity theft.

The website fraud involves two types of deceptions. In the first type,
the perpetrators are copying a legitimate credit union's website in its
entirety, and substituting false phone numbers in the place of the
credit union's legitimate phone numbers. Thus far, this fraud has been
conducted by the same persons involved in the newspaper advertisement
fraud. As such, the scheme directs victims to make advance payments on
promised loans, and provide personal information.

The second type of website fraud is the posting of a website that uses
the words "credit union" in its title, such as "XYZ Federal Credit
Union." The site then links to a number of various products and
information, some of which may be financial in nature, and some of which
offer consumer type products for sale. By masquerading as a credit
union, these fraudulent websites are trading on the good name of an
existing credit union and/or on the public's faith and trust concerning
credit unions. As is the case with the other type of website fraud, the
perpetrators will often use a domain name and web address that is either
exactly or very similar to the name and address of an actual credit
union.

In response to all of these fraudulent activities, the NCUA has been
working with relevant supervisory and law enforcement authorities,
including the Federal Bureau of Investigation. As a result, once the
existence of a fraudulent advertisement or website becomes known,
working together we have had success in stopping these activities.
Further prevention of this type fraud, however, depends upon learning of
new fraudulent advertisements and websites, and immediately acting upon
this information.

Accordingly, we recommend that all federally-insured credit unions take
an active role in policing this matter, including reviewing local
newspapers for suspicious advertisements. Similarly, credit unions
should conduct regular internet searches for entities that may be using
domain names exactly like, or similar to the name of their credit union.
Credit unions may also consider purchasing domain rights to such names,
if available, to help prevent against misuse of their name. Further
information and guidance on the use and protection of credit union
websites can be found in a December 2002 NCUA Letter to Credit Unions on
Protection of Credit Union Internet Addresses, No. 02-CU-16,
http://www.ncua.gov/ref/letters/letters2002_2000.html.

Finally, if you have any information regarding any of the above
mentioned activities, please call the NCUA Fraud Hotline at (703)
518-6550 or (800) 827-9650. In addition to contacting the NCUA, affected
credit unions should consider filing a Suspicious Activity Report and/or
directly contacting the local office of the FBI. Similarly, credit union
members who have fallen victim to these scams should contact their
credit union, the NCUA and/or the FBI. Moreover, to protect against
further identity theft, members should also consider filing a complaint
with the Federal Trade Commission, and notifying their credit bureaus.
Further information and guidance on protecting against identity theft
can be found at the FTC's web site, http://www.consumer.gov/idtheft/.

> Sincerely,

/S/

> Dennis Dollar

Chairman