Fraudsters are targeting vulnerable people through "advance fee" scams - where victims are asked to pay money upfront for goods or services such as loans that never materialise.
Lloyds Bank has issued a warning about this type of scam and says the number of them have soared in the last year. People with a poor credit history are particularly likely to be targeted as households feel the squeeze from cost of living pressures.
The number of "advance fee" frauds reported to Lloyds Banking Group by customers jumped by 82% across 2022, compared with 2021. The average amount of money lost by victims in 2022 was £711, lower than an average of £1,194 in 2021, suggesting fraudsters may be pursuing a higher volume of lower value scams in the current economic environment.
Read More: Holidaymakers warned to watch out for fake deals as scammers take advantage of cost of living crisis
Lloyds said its figures suggest people living in deprived areas may be particularly likely to report being scammed in this way. It matched analysed victim location data against the English Indices of Deprivation. People aged 25 to 34 were the most likely age group to report falling victim, followed by those aged 35 to 44.
Loan fee scams are a particular concern as fraudsters will often target people on low incomes or with a poor credit history, Lloyds added. It said reports of loan fee scams have more than doubled over the past 12 months, compared with the previous year. The average amount lost by victims last year was £214.
How does the scam work?
Victims will typically reply to an online advert for a "fast loan" and are told they must pay an upfront fee by bank transfer. Once the fee is paid, the fraudster may ask for further payments. Eventually, the victim does not hear from the company again and the loan is never received.
In one case seen by Lloyds, a woman was searching online for loans after receiving a bill for car repairs. She then received an unsolicited WhatsApp message from someone offering her a £1,300 loan without credit checks.
She was told that, to secure the loan, she would need to pay the first month's repayment of £120 upfront via bank transfer, which she did. Shortly after, she was asked to pay an additional £199 for "payment protection insurance" in case she became jobless.
The attempted payment for £199 was blocked by the bank and the person she was dealing with on WhatsApp asked her to send the money to another account. The woman became suspicious and asked for the initial £120 payment to be returned - but the money had disappeared.
Liz Ziegler, fraud prevention director at Lloyds Bank, said: "Fraudsters will ruthlessly adapt to any changes in consumer behaviour and, with the increased cost of living putting more pressure on people's finances, the recent surge in advance fee scams targeting those on low incomes or with a poor credit history is alarming."
How to avoid becoming a victim
Here are the bank's tips to stay safe from loan fee scams:
1. Do research to ensure you are dealing with a real company. You can check firms using the Financial Conduct Authority's website.
2. Remember that reputable lenders will conduct a thorough credit check before offering a loan.
3. You should not be asked to pay an upfront fee for a loan from a genuine company. If you are, it may be a scam.
4. If you are worried about your financial situation, talk to your bank first. They should be able to help or point you towards a reputable organisation that can.
Read Next:
DWP issues urgent scam warning to anyone receiving £301 cost of living payments
Social media scams to look out for in 2023 and how to avoid them
Travellers warned of eight holiday scams you need to watch out for when booking trips
Seven signs to look out for that show a website may be a scam
Tech experts issue warning over worrying rise in Instagram account cloning and social media scams
