Borrowers unaware of how to check loan providers as scams increase
A THIRD of personal loan applicants have admitted they weren’t confident about how to check if their provider was legitimate, the Financial Conduct Authority (FCA) has revealed.
Research by the City watchdog found 36 per cent of those who took out a loan product in the past three years didn’t do any checks to ensure the legitimacy of their loan provider.
It comes as the regulator urged borrowers to look out for loan fee scams when applying for finance.
The FCA has revealed that more than £3.5m has been lost to loan fee fraud and said reports to its consumer helpline on this issue had increased by 44 per cent.
Victims of loan fee fraud are often targeted while searching for loans online and are then contacted by fraudsters offering a loan.
The scammer tells the victim they have to pay an upfront fee for the loan which they ultimately never receive. Once the first payment is made victims are often persuaded to make multiple payments – last year the average loss was £740, according to Action Fraud.
“We’re seeing an increasing number of cases of loan fee fraud reported to us,” Mark Steward, executive director of enforcement and market oversight, at the FCA, said.
“Fraudsters target people making online loan applications and who think they’re being contacted by a legitimate loan provider, when they are not at all.
“Scammers take advantage of the excitement people feel when they are offered or accepted for a loan and make the loan conditional of an upfront fee, which can increase to hundreds of pounds. Of course, no loan ever materialises.
“Before applying for a loan always check who you’re dealing with, be sceptical, make sure the loan provider is authorised by the FCA.”
Read more: Lenders underestimating consumer credit risk, Bank warns
In 2017 there were more than 4,700 reports of loan fee scams made to Action Fraud and it has now overtaken investment fraud as the most common scam reported to the FCA.
The FCA issued a warning to consumers earlier this month about a clone of peer-to-peer lender Funding Circle.
The clone, Funding Circle Loans, had set up a website purporting to be the P2P platform.
Its website, http://fundingcircle.bravesites.com, has since been suspended.
Read more: Consumer credit regulation “largest” challenge FCA has faced
