FCA warning over increase in loan scams

The plea comes after £3.5m was lost to loan fee fraud last year and reports to the FCA consumer helpline increased by 44 percent, the regulator said.

Victims of loan fee fraud are often targeted while searching for loans online and are then contacted by fraudsters offering a loan.

The scammer tells the victim they have to pay an upfront fee for the loan which they ultimately never receive. Once the first payment is made victims are often persuaded to make several payments, with an average loss of £740 in 2017.

In 2017 there were over 4,700 reports of loan fee scams made to cyber crime reporting centre Action Fraud, overtaking investment fraud as the most common scam reported to the FCA.

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. Check our register at fca.org.uk.”

Peter Tutton, StepChange Debt Charity head of policy, added: “People struggling with debt or looking for credit to make ends meet can be especially vulnerable to loan fee fraud. People need more help to spot the fraudsters and stop them getting away with these scams.”