FCA warns of rise in loan fee scams this Christmas
The City watchdog has warned of the increasing risk of loan fee fraud this Christmas, with cases up by 21 per cent compared to last year.
Loan free fraud is where a consumer pays a fee for a loan they never receive. Fraudsters will often pressurise consumers into making a fast payment for a non-existent loan.
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The Financial Conduct Authority (FCA) has commissioned research which found that people are particularly susceptible to getting scammed amid the cost-of-living crisis.
The average loan fee fraud costs consumers £260, the FCA said, more than half the total amount people expect to spend on Christmas presents this year (£444).
Two in five respondents said they are feeling pressured by family and friends to maintain their usual Christmas spending this year, while more than one in eight people plan to take out a loan to support their spending over the holiday period.
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Worryingly, 64 per cent of the 2,000 UK adults surveyed are unaware of what loan fee fraud is, while just 22 per cent are able to identify all its warning signs.
“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,” said Mark Steward, executive director of enforcement and market oversight at the FCA.
“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.
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“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.”
The FCA highlighted some of the most commonly-used tactics of loan fee fraud, which include being contacted out of the blue and offered a loan, after having made several loan applications online; being asked to make an upfront payment into a bank account; and being asked to make multiple payments before they can give you the loan.
