The Financial Conduct Authority (FCA) typically receives an increase in reports of loan fee fraud over the festive period.
Loan fee fraud happens when someone pays a fee for a loan they never receive – and the FCA is concerned that rising financial stress could place more people at risk of scammers’ tactics this year.
Some consumers may be tempted to take out loans to meet these extra costs. Unfortunately, this is where loan fee fraud scammers and illegal lenders see an opportunity
An often-used tactic by loan fee fraudsters is to pressurise people who are seeking quick access to cash – but those falling victim stand to lose £260 on average.
The regulator said such scams have already increased in frequency in the past year, with the number of cases reported rising by around a fifth (21%) between November 2021 and October 2022 compared with the same period a year earlier.
The FCA is asking people to check its register if they are asked to provide an upfront payment for a loan.
It found that nearly two-thirds (64%) of consumers are unaware what loan fee fraud is.
Mark Steward, executive director of enforcement and market oversight, FCA, said: “This Christmas period is going to be tough for many consumers, and those who have been hardest hit by the rising cost of living will understandably be anxious about meeting the additional expenses that Christmas brings.
Don’t let scammers be the ones enjoying your Christmas this year
“Some consumers may be tempted to take out loans to meet these extra costs. Unfortunately, this is where loan fee fraud scammers and illegal lenders see an opportunity.
“At a time of heightened stress and pressure, scammers and illegal lenders will rush consumers into bad decision-making.
“Be aware of red flags – such as being asked for a fee or being asked to pay in an unusual way. And if you are considering taking out a loan, please pause and check the FCA’s Register to make sure you are dealing with a legitimate lender. Don’t let scammers be the ones enjoying your Christmas this year.”
Here are some warning signs of potential loan fraud, according to the FCA:
– Having made several loan applications online, you are then contacted out of the blue by text, email or phone and offered a loan.
– Being asked to make an upfront payment into a bank account, or transfer money via an unusual method.
– Scammers may claim that the fee is refundable and will be used as a deposit, administrative fee, insurance, or because of bad credit history.
– You may be put under pressure to pay the fee quickly.
– Once the first payment has been made, the scammer might contact you again to ask for more payments before they can give you the loan.
– Even though you make the payments, you never receive the loan.