Loan fee fraud set to soar ahead of festive season
Scammers are targeting consumer borrowers ahead of the festive season this year, amid warnings that loan fee fraud is set to rise again.
Last year, there were 1,456 reports of loan fee fraud, with victims losing an average of £274 each. The Financial Conduct Authority (FCA) reported that it saw 32 per cent more loan fee fraud calls last Christmas than in the rest of the year.
The regulator is now warning consumers to be aware of loan fee fraud, and urging people to only work with regulated lenders.
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The FCA has told people to look out for unsolicited calls, text or emails which offer a loan out of the blue. Scammers will then ask the consumer to make an upfront payment, which may be into a bank account, by money transfer, or via Amazon or iTunes vouchers. This may be positioned as a deposit or admin fee, and scammers will sometimes claim that it will be refunded when the loan is issued.
Sometimes the fraudsters will contact the same consumer again asking for another payment to secure the loan.
“Loan fee fraud surges over Christmas,” said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.
“This is where you think you’re applying for a loan, and you’re asked for a fee up-front. Once you’ve handed over the money, the criminals either disappear, or come back asking for more money. Once you hand this over, you’ll never see them, or your money, again.
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“It’s a horrible crime, designed to hit people at their most desperate. It leaves borrowers with even worse debt problems than when they started.
“A simple rule of thumb is that if you’re borrowing money, in the vast majority of cases you shouldn’t need to pay a fee up-front. There are exceptions, so you’ll usually pay a fee for things like mortgages, equity release, and some balance transfer credit cards. There are also credit brokers, who charge to find you credit, but most people shouldn’t need to use their services.”
Coles added that anyone who is struggling to pay off their loans should speak to a debt charity such as StepChange or National Debtline.
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