FCA warns consumers to watch out for signs of loan fee fraud
The Financial Conduct Authority (FCA) has launched a new campaign to help consumers spot and avoid loan fee fraud.
Loan fee fraud – where a consumer pays a fee for a loan they never receive – typically results in a £260 loss and this type of fraud is more prevalent in the summer months as spending increases.
“For many, summer brings with it the chance to relax and unwind but it also brings with it financial pressures – from holidays and festivals to funding days out, or out of term child-care for parents,” said Steve Smart, executive director of enforcement and market oversight at the City regulator. “With inflation, energy costs, and rising mortgage bills, this summer spending will come at a time of enhanced vulnerability for many.
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“For fraudsters, this provides the perfect opportunity to take advantage of people considering how to make ends meet over the summer months.”
The FCA’ data found that last summer, there was a 26 per cent increase in complaints from consumers who had fallen victim to loan fee fraud compared to 2021.
The cost-of-living crisis is increasing the risk of fraud. A new survey commissioned by the FCA found that over half of UK adults (55 per cent) are also more worried about personal finances this summer than they were last year.
Summer-related expenses were found to be the most prominent financial worries after rising food and energy costs. According to the research, 24 per cent of consumers are turning to credit or loans to fund this additional summer related spending, which loan fee fraudsters could use as an opportunity to steal money, the FCA said.
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The watchdog is raising awareness of loan fee fraud over the summer by urging consumers looking for a loan to do the three-step check to protect themselves from scams:
- If you are cold called or emailed, it could be a scam
- If you’re asked to pay an upfront fee, it could be a scam
- If you’re asked to pay quickly or unusually, it could be a scam
“Follow our three-step check for loan fraud for how to spot the signs of loan fee fraud, and if you need to apply for a loan, check the register to see if the firm is legitimate,” said Smart. “Don’t get burned by scams on your summer holidays.”
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