The Financial Conduct Authority (FCA) has issued a warning about the dangers of loan fee fraud in the run up to Christmas.
The FCA found that cases of loan fee fraud are up by a fifth compared to last year. This troubling rise comes at a time when consumers have seen additional pressure placed on their finances.
Here, we explain how loan fee fraud works and offer advice on how to report scams.
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What is loan fee fraud?
Loan fee fraud (also called advance fee fraud) is a scam where a fraudster asks you for an upfront fee, usually between £25 and £450, in order to take out a loan.
Scammers target people who have been searching for loans online. Victims who have made several online loan applications are contacted by scammers via text, email or telephone and are offered a non-existent loan. The catch is that an upfront fee needs to be paid, and in some cases, more than one fee is requested.
People experiencing financial difficulties, those with a poor credit history and those on a low income are particularly vulnerable to scammers preying on their inability to access mainstream loans.
Victims are told that the fee acts as a deposit, administrative fee, insurance or is required because of their bad credit history and will be refunded later. Scammers may ask for the fee to be paid in an unusual way, such as via Western Union or in vouchers, and may pressure victims to make the payment as soon…
