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A "loan" company contacted me saying I was approved for up to $4,000. The man said I needed to allow them to deposit $400 into my account to verify my account. Then, he wanted me Cash App the company $220 and once that's received, I can get the amount I want for the loan.

I smell scamming, am I wrong?

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    Rule of thumb: any time you need to give money in order to later get money it is likely a scam. Especially if you're giving money in a way that's significantly different from the way in which you're getting the money.
    – littleadv
    Commented Jul 18 at 19:56
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    I agree with @littleadv except substituting "always" instead of "likely"
    – JohnFx ♦
    Commented Jul 18 at 22:17
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    If they contact you first, it's likely a scam.
    – pts
    Commented Jul 19 at 15:54
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    It's a scam but even if it wasn't one, be very wary of anyone who really desperately wants to loan you money. The terms of such a loan are unlikely to be favorable to you.
    – JimmyJames
    Commented Jul 19 at 19:42
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    I needed to allow them to deposit $400 into my account Out of curiosity - how does such "allowing" work? In Europe at least we have IBAN identification for accounts and you do not need someone's authorization to transfer funds there (you need of course to provide the IBAN, but this is not a secret).
    – WoJ
    Commented Jul 19 at 21:30

3 Answers 3

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Sometimes a legitimate financial company wants to test that the bank information is correct and that you can see the account. They make two small transactions that equal $1.00. They then ask you the amount of each the transactions. They then pull back the funds by reversing the transaction.

There is no reason to do this with $400 instead of $1.00. There is no reason the have you send the $220 to somebody else. But fully expect that once you transfer the $220 they will reverse the original $400 and will disappear.

Yes it is a scam. It doesn't matter if you contact them first, or if they contacted you first. This has all the red flags of a scam.

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    Additionally, no financial institution is going to request payment via Cash App.
    – Jason Patterson
    Commented Jul 19 at 5:54
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    I have actually had charges of £0.01 to verify that my bank card was working. No idea and I don't care if they refunded the money :-)
    – gnasher729
    Commented Jul 19 at 11:21
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    @DanielR.Collins the point is that my example equaling a single dollar or yours of a couple of cents doesn't change the fact that nobody would do a test with $400.
    – mhoran_psprep
    Commented Jul 19 at 15:22
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    The two random payments totalling a known insignificant amount ensures the bank account works for payment reception and asking for the amounts ensures the 'person' controlling the account can access its balance information.
    – civitas
    Commented Jul 20 at 0:19
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    The amounts are typically random e.g. do not add to $1. That greatly increases entropy and reduces guessability. For instance 2 random amounts between 1-100 cents give 5050 possibilities.
    – Harper - Reinstate Monica
    Commented Jul 20 at 2:11
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It is a SCAM!!. A legitimate loan company would never request that you deposit money into your account or send them money as an account verification procedure for obtaining a loan.

This is a way scammers can use your bank account to move Illegal money gotten from fraudulent activities, also requesting to send money through platforms such as Cash App is a favourite trick since it is difficult to trace and return the transaction.

Legitimate lenders may charge an application fee, but it's usually applied to the loan itself. Not paid for ahead of time.

This tactic is often used by scammers from West Africa, and east Asia.

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  • Legitimate fee: You get a $4,000 loan but over 48 months you pay back the $4,000 loan, a $100 fee and interest.
    – gnasher729
    Commented Jul 19 at 11:23
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A legitimate financial institution would have reason to deposit (and then withdrae) two small amounts totaling less than $/€/£ 1 in order to be sure they have the correct account to make deposits to or make withdrawals from. They can also do this to prove you have access to the account by having you identify the two amounts.

Other than this, if they want you to pay them money in order to get a loan, it is a scam. But you could scam them back. Use an account that has no money in it, let them put the $400 in, have someone watching the account move that money elsewhere immediately, then change your mind and don't pay them the $220. Let 'em sue you for the $400, which they can't do!

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    You're missing that money is fungable. When the scammer reverses their deposit, $400 will go from the account even if that specific $400 was removed.
    – Criggie
    Commented Jul 22 at 0:03
  • This is bad advice. The $400 is not real, it is a fake transfer. If you remove the money before the bank realizes this, then they (the bank) will simply come after you for the money. OP should not do ANY business and should cut contact immediately.
    – Nosjack
    Commented Jul 22 at 18:08

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