FCA warns public after surge in loan-fee fraud

The Financial Conduct Authority has warned the public to beware of scammers charging fees for non-existent loans after annual losses from the fraud exceeded £3.5m.

Victims of the fraud are often targeted while looking for loans online. Scammers contact them offering a loan and asking for an upfront fee but they never get the money promised.

Once the first payment is made, victims often give in to pressure for further payments. Last year the average loss to the scam was £740.

The FCA said complaints about the fraud to its consumer helpline increased 44% in 2017 to more than 4,700. Loan fraud has overtaken investment fraud as the most common scam reported to the FCA yet 72% of the public are unaware of the practice.

Mark Steward, the FCA’s executive director of enforcement and market oversight, said: “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 and make sure the loan provider is authorised by the FCA.”

Fraudsters often claim the fee is a deposit, an admin fee or insurance for those with low credit ratings. The FCA said other warning signs included unusual payment methods such as iTunes vouchers or a money transfer service, pressure to pay quickly and demands for multiple fees.