A consumer loan consists of a long-term obligation, which requires a relationship of trust between the lender and the borrower. Consumer credit does not have the best reputation in Switzerland. Lender fraud is rare, but it does, which of course does not add to the reputation of the Swiss credit market. How common is credit fraud? What can you do to protect yourself and what should you watch out for before taking out a loan? We have the information for you!
Know the actors
The credit market in Switzerland is heavily regulated by the federal government. Several legal articles (KKG and UWG) define the criteria for granting personal loans completely and precisely. Such regulation aims to protect the consumer by minimizing the risk of over-indebtedness.
Banks and other “official” lenders and intermediaries are subject to these rules, but this does not apply to “private” providers who make loans unofficially. There are three main types of players on the market:
- Credit banks: These officially issue consumer loans and are therefore obliged to respect current legislation.
- Intermediaries (agencies and independent brokers): These officially work with banks. The banks control the intermediaries with whom they work very strictly. The number of credit intermediaries has also fallen sharply in recent years.
- Private: They offer “own” solutions outside the legal limits. Unfortunately, this category contains the most common scams.
Bank loan: the safest solution
A consumer loan from a bank is a fully secured product. To obtain one, you can either contact the bank directly or prefer a detour through a broker / credit agency that negotiates the loan terms with your banking partners. This solution is generally preferable if someone wants to obtain a loan and at the same time want to protect themselves from fraud. Also:
- The loan is based on an official contract and legal guidelines that protect both the bank and the borrower.
- Turning to an intermediary means no additional risk because the final contract is concluded with the bank. In addition, mediation often enables administrative support and better interest rates.
- Interest paid on the loan is possible under tax law (tax relief).
- Dossier fees are not charged.
Consumer credit from private individuals: Beware of fraud
The majority of credit fraud cases occur when the loan is granted by a private individual. Although the interest rates offered can sometimes be attractive, this option is not recommended. Because:
- Fraud is relatively common.
- The loan is not secured by law: tax benefits cannot be used.
- Sometimes dossier fees are charged.
- Apart from the offered interest rate, the total cost of the loan must also be taken into account (different calculation methods can cause different total costs).
What exactly do scams look like?
Personal credit scams usually happen in two different ways: data theft and abusive dossier fees.
Data theft consists in getting the maximum amount of information from the customer by luring him with a particularly cheap loan. Ultimately, the credit never comes and the culprits now have complete data that can either be sold or used to imitate the customer’s digital identity (theft of credit card numbers, extortion, etc.).
The requirement of abusive dossier fees is simply to charge dossier fees that the customer overrides, only to then collect the money and “disappear” without further information. It is just a simple theft.
When should you be suspicious?
First, be suspicious of ads or comments that are circulating on social networks and obviously don’t come from an official agency or a bank. For example: Mr. XXXXX helps you financially thanks to cheap loans. It is clearly an attempt to defraud. In general, basic security measures should be observed:
- Know the true identity of the borrower: is it an agency with an official website? Is there a real phone number and address? If it is a private person: Is he registered as a self-employed person in the commercial register? Can you find him in a phone book, does he have a landline number in Switzerland?
- Deny any potentially harmful information, such as a credit card number or password.
- Refuse to pay dossier fees: Official agencies and credit banks never charge dossier fees.
- Be suspicious of offers that are “too good to be true”: Loans are rarely given at interest rates below 6.9% or 7.9% and almost never below 5.9%.