The Financial Conduct Authority (FCA) is warning people not to be tricked by callous criminals looking to prey on financially vulnerable households seeking loans as the cost of living crisis continues to surge. The city regulator has reported receiving a growing number of calls about loan-fee fraud - when people pay fees up front for loans that they never receive.
Instead of getting the loan they were hoping for, those struggling with their finances end up even worse off - losing on average £280 to the scam. Victims tend to be aged 25 to 45, are slightly more likely to be male (60%) than female (40%) and often work in manual occupations or are unemployed, according to the FCA.
Energy bills are undoubtedly putting the most pressure on household finances and are expected to increase to an eye-watering £3,600 this winter. This is forcing many people to take drastic action now to keep on top of other outgoing costs before the Ofgem price cap comes into effect on October 1.
However, financial pressure can make people vulnerable to scammers offering fake deals, goods or refunds which turn out to be clever ploys to obtain personal details, gain access to bank or savings accounts or simply take your money.
A joint statement from Mark Steward, executive director of enforcement and market oversight, and Sheldon Mills, executive director of consumers and competition at the FCA, said: "The rising cost of living is making 2022 a hard year financially and there are scammers out there looking to make it even harder.
"Scammers are cruel. They target society's most financially vulnerable - those who tend to be on lower incomes, might have lower credit ratings or have limited access to mainstream credit."
The FCA has also relaunched campaign activity, in partnership with Citizens Advice and MoneyHelper, to help raise awareness of loan-fee fraud.
Warning signs of loan-fee scam
If any of the following apply, it could be a scam to look into the company further before sending any personal details:
- Being asked to pay a fee up front
- Being asked to pay quickly
- Being asked to pay in an unusual way, such as by vouchers or a money transfer
People are being urged by the regulator to use the FCA Register to check who they are dealing with.
You can also visit the FCA's loan-fee fraud webpage to find out how to check and for more information.
Inquiries to the FCA's contact centre about all types of scam were up by 24 per cent as a whole in June, compared with the same period last year.
Reported loan-fee fraud scams into the FCA's contact centre were up by 36 per cent last month compared with June 2021.
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