Consumers Warned Over Alleged Loan, Insurance Scam by Jefferson Financial, Watermark Insurance

December 29, 2004

The Vermont Department of Banking, Insurance, Securities and Health Care Administration and the nation’s Better Business Bureaus have issued consumer advisories against companies going by the names Watermark Insurance, Inc. and Jefferson Financial Corp. among others.

According to Ken McGuckin, an examiner with the Vermont department, the scams reported to that state’s department indicate that consumers are told by Watermark Insurance representatives that a loan will be provided by Jefferson Financial Corporation (said to be based in Utah), but only if the consumer purchases “loan protection” or “unemployment” insurance.

The Better Business Bureau last month issued an international alert about Jefferson Financial’s alleged use of the “BBB” name to market advance fee loans whereby consumers are told they must pay as much as $5,000 before receiving their loan.

The BBC said that the company goes by several names, including JFC Financing, Jefferson Financial Corporation and Steinburg Financial. Other reports suggest the names Malibu Trust and Kingsway Financial may also be used.

The Council of Better Business Bureaus said it has learned that some of the same individuals operating Jefferson Financial were involved with a similar advance fee loan operation last summer (Kirkland Russell and Thomson or KRT), which also used fake BBB phone numbers and reports as a shill for marketing advance fee loans.

The address for Jefferson Financial given to potential customers is actually an apartment complex in Layton, Utah. The business phone number, 888.647.6454, does not always connect to a person and its Web site, www.jfcfinancing.com, operates intermittently, according to BBB officials.

(Insurance Journal calls were not connected and the web site said it was under repair.)

Watermark Insurance is purportedly located in Essex Junction, Vermont, but is not licensed as an insurer in Vermont and the address of 37 Lincoln Street is not valid, according to state officials.

The BBB said people from every region of the U.S. are contacting it to file complaints against the business, which appears to be operating out of Toronto, Canada, but specifically targeting consumers and businesses in the U.S.

“We’re alarmed because potential customers who have called this business’s phone number report being told that the company is a member of the Better Business Bureau, a false claim. Other victims said they were transferred to a ‘Better Business Bureau Department’ that faxed them copies of counterfeit BBB reports. The company is has also provided a number of counterfeit BBB reports about itself and potential competitors through two fake BBB Web sites that we suspect it established. These practices mislead consumers and violate federal trademark, counterfeiting and copyright laws,” said Ken Hunter, president and chief executive officer of the Council of Better Business Bureaus.

The fake BBB Web sites (www.bbbwest.org and www.bbbsouthwest.org) were taken down by the Internet service providers after being alerted by the CBBB to the fraudulent nature of the sites. The sites were registered to an individual in Toronto.

Jefferson Financial is involved in other fraudulent activities, “including misleading consumers about the risk involved in doing business with this entity,” according to a report developed by the Better Business Bureau of Utah.

Jefferson Financial is not associated with Jefferson-Pilot, the life insurer out of North Carolina.

The BBB in Salt Lake City reports that the business contacts those with a poor credit history and promises consumer or business loans in amounts up to $25,000. Victims of this scam report being asked to send advance fees in order to obtain their loans. Some indicate that their losses have exceeded more than $5,000. No company by this name is licensed to make such loans in Utah.

“The BBB is unaware of any evidence that any individual has actually received a loan from this company, no matter how much the victim has paid in advance fees,” said Russ Behrmann, president of the BBB of Utah. “Furthermore, when some victims contacted the company for refunds, they were asked to pay additional up-front fees.”

The web site, www.badbusinessbureau.com, has several complaints from consumers alleging they were defrauded by Watermark, Jefferson Financial or what are alleged to be related companies known as Malibu Trust and Kingsway Financial.

Complaints filed with the BBB are being presented to appropriate law enforcement agencies in the U.S. and Canada.

Advance fee loans to consumers are illegal in the U.S. Vermont officials further advised that no entity can require consumers to purchase insurance from a specific company or seller in order to receive a loan.

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