What is loan fee fraud?
We asked the Financial Conduct Authority to explain
In 2020, the Financial Conduct Authority recorded a 32% increase in reports of loan fee fraud to their contact centre per month during the festive period. Within the last year victims have reported an average loss of £274 per fraud. However, during the festive period this increased to an average of £355 as people increased spending to buy presents and celebrate with friends and family, making them more likely to seek credit from loan providers.
But what is loan fee fraud?
A loan fee scam happens when you’re asked to pay an upfront fee for a loan which you will never receive. The lender may ask you to pay for the loan in an unusual way, such as iTunes vouchers. It also happens to people who find it more difficult to get mainstream loans. Loan fee fraud happens especially at Christmas when you’re pressured to spend more than usual.
We’ve teamed up with the FCA to raise awareness about these scams.
What are the signs of a loan fee scam?
There are several signs that might mean a scam:
- You’ve been contacted out of the blue by text, email or phone and offered a loan
- You’ve been asked to pay an upfront fee for a loan in an unusual way — Western Union, iTunes vouchers or directly into a bank account
- You’ve been told the fee is refundable and will be used a deposit, administrative fee or because you’ve got bad credit history
- You’re pressured to pay the loan quickly
- You’re asked to make more payments before receiving the loan
Ultimately, you never receive the loan.
What should I do if I’ve been scammed?
If you’re looking for a loan and are approached by someone offering one, before you do anything check the FCA’s website to see if they are a registered company and what they are regulated to do. If someone is asking you to pay upfront for a loan — it’s likely a scam and you should seek a loan from elsewhere.
If you are scammed, our #ScamsAction service can help.
The Financial Conduct Authority is the conduct regulator for 51,000 financial services firms and financial markets in the UK. In addition, they provide advice to consumers on a wide range of financial scams and provide complaint services. You can check if a financial organisation is registered with the FCA here.
The Citizens Advice Scams Action service provides free, impartial and confidential advice on scams. As well as advice on the scams themselves, we can also help you with other issues such as debt or housing. Read more about the service.
Article by Emily Nix