Warning over loan fee scam targeting vulnerable borrowers

People applying for loans online are being warned of a scam which has embezzled £3.5 million out of borrowers, many of whom are struggling financially.

The Financial Conduct Authority (FCA) is raising awareness of the loan fee scam which is posing a ‘growing threat’ to the public with incidents increasing by 44% from 2016 to 2017.

Victims of the fraud are mainly targeted when searching for loans online. They are contacted by fraudsters who offer a loan and demand an upfront fee.

Often, once this initial payment is made, victims are persuaded to make multiple payments. But despite handing over on average £740, victims never receive the loan.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “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 on an upfront fee, which can increase to hundreds of pounds.

“Of course the loan never materialises.”

Now the FCA is urging anyone applying for a loan to always check who they are dealing with and to be sceptical.

It said being asked to pay a fee before receiving a loan can be a warning sign of this type of fraud. To avoid scams, it was vital for consumers to check they were dealing with FCA-authorised firms, which can be done by visiting its register.

Debt charity, StepChange, said it was particularly concerned about the scam as it was targeting people who were likely to be in financial difficulties.

Peter Tutton, Stepchange’s head of policy, said: “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.”

It said potential borrowers should also look out for pressure to pay multiple fees with promises they will be refunded, demands to pay quickly and requests for payments to be made in unusual ways.

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