FCA warns about growing loan scam

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The Financial Services Authority has issued a public warning after consumers lost £3.5m in fraudulent loan applications last year.

The regulator says it has been seen a big increase in this type of fraud with the number of people complaints about scams rising by 44% from 2016 to 2017.

These scams typically target those who are in distressed financial circumstances and looking for a short-term loan.

When consumers search for loan providers online customers are contacted by an unregistered firm which informs them that they have approved for credit, provided they pay an upfront fee.

The FCA says customers are persuaded to pay multiple fees, with the average loss being  £740.

FCA executive Mark Steward says: "In 2017 there were over 4,700 reports of loan fee scams made to Action Fraud. Additionally, it has now overtaken investment fraud as the most common scam reported to the FCA. Scammers target the most financially vulnerable in society, people on lower incomes and with low credit ratings, who have limited access to mainstream credit."

'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.'

The FCA is encouraging the public to be wary if asked to pay an upfront fee for a loan as it could be a sign of a scam. The regulator is also urging people to only use authorised firms which you can check on the FCA’s online register. It’s important to make sure the contact information provided by the firm match the details on the register to ensure you’re dealing with the real firm.

Source Link

https://www.fca.org.uk/news/press-releases/fca-warns-public-increased-threat-loan-scams