The Financial Conduct Authority (FCA) has warned consumers to be wary of the activities of loan scammers, as it revealed that UK borrowers lost more than £3.5 million to loan fee fraud in 2017. The average loss was £740, according to data from Action Fraud.
Calls to the FCA’s consumer helpline about loan frauds also increased by 44% compared to the previous year. This means it is now the most commonly reported type of fraud to the regulator’s helpline, having overtaken investment fraud.
Loan fee scammers typically target people who are searching for loans online. The criminal tells the individual that they are eligible for a loan, but that they must first pay an upfront fee. No loan is ever provided, and the victim is often then duped into making follow-up payments. Many of the victims are amongst the most vulnerable members of society, such as those who may have difficulty accessing mainstream credit.
Whilst a number of legitimate firms charge fees before commencing the process of sourcing a loan for their customers, the FCA is warning that being asked to pay an upfront fee could be a sign of a potential scam.
Other warning signs highlighted by the regulator include:
- Being asked to pay the fee in an unusual way e.g. by iTunes vouchers or a money transfer service
- Being pressurised into making the payment immediately
- Receiving requests to pay fees on multiple occasions
- The firm’s contact details not matching that given for a firm with the same name on the Financial Services Register
Separate FCA research shows that 34% of people are not confident as to how to check if a firm is legitimate. 36% of people who took out a loan in the last three years didn’t do any checks to ensure the firm they were dealing with was legitimate. Warnings about firms suspected of acting illegally are posted to a dedicated section of the FCA website.
The FCA press release also highlights that it has the power to initiate civil and criminal prosecutions of firms who carry out illegal activity.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
“We’re seeing an increasing number of cases of loan fee fraud reported to us. 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.”
Data from Prudential also demonstrates the growing threat posed by pension scams. 9% of people aged 55 or over believe they have been approached by pension scammers, however only 18% of those who were approached reported the matter to the authorities. Around 6% of those who have been contacted believe they have fallen victim to a pension fraud.
Many of the respondents reported being offered alternative investments such as wine, overseas investments and crypto-currencies.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article