FCA warns on loan fee fraud risk ahead of Christmas
The Financial Conduct Authority (FCA) has warned of a heightened risk of loan fee fraud in the run up to the festive season, as families borrow more to pay for gifts.
The City regulator said that 29 per cent of parents with young children have either already borrowed money or are intending to borrow money to cover the cost of Christmas this year. This means that millions of people could be at risk of loan fee fraud in the coming weeks.
Loan fee fraud is where a consumer pays a fee for a loan they never receive. According to FCA analysis this typically results, on average, in a £255 loss.
Read more: FCA warns on BNPL boom
“Fraudsters will take advantage even of parents’ desire to give their children a good Christmas,” said Therese Chambers, the FCA’s executive director of enforcement and market oversight.
“Don’t let them. 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. And if you are asked to pay quickly or unusually, it could be a scam.”
FCA research found that 40 per cent of UK adults are concerned about being able to afford Christmas spending this year, with this figure rising to 52 per cent among parents with children under the age of 18.
Meanwhile, almost half of UK adults (47 per cent) feel pressured to spend beyond their means during the festive period to provide for loved ones. This rises to 64 per cent for those with children under 18.
Read more: Third of Brits have skipped key payments this year
The FCA has partnered with the coalition Debt Free Advice to publicise the risks of loan fee fraud during the month of December.
“As Christmas approaches, families across the country face mounting pressure to keep up with societal expectations, often leading to increased debt and financial strain,” said Matt Dronfield, managing director of Debt Free Advice.
“Many of our clients are already burdened by the weight of utility bill debt, imposed by the ongoing cost of living crisis. Holiday-induced debt can have far-reaching consequences, affecting families’ financial stability, mental health, and overall wellbeing.”
Read more: New long-term funds set to democratise private credit