The Financial Conduct Authority has warned consumers to be aware of loan fee fraud as the cost of living crisis continues to squeeze finances.
According to the FCA, 55% of UK adults are more concerned about their finances this summer than they were last year.
While nearly half (46%) of adults have gone away or plan to go away on holiday this summer, more than a third (35%) are worried about how they’re going to pay for it. With nearly a quarter (24%) of consumers turning to credit or loans to fund their summer spending, the regulator has cautioned that a growing number of people may be susceptible to loan fee fraudsters. Parents, in particular, could be at risk with 21% stating that they have already, or were planning to, take out a loan to cover costs this summer.
Loan fee fraud – where a consumer pays a fee for a loan they never receive – typically costs consumers £260 and is on the rise. The FCA reported a 26% jump in the number of complaints from consumers who had fallen victim to loan fee fraud last summer compared to 2021.
To combat the risk, the FCA has published a 3-step loan fraud checklist.
It has warned that cold calls, emails and asking to pay a fee upfront are all signs it could be a scam. In addition, consumers should be wary if they are asked to pay quickly or in an unusual way.
Steve Smart, executive director of enforcement and market oversight, said: “For many, summer brings with it the chance to relax and unwind but it also brings with it financial pressures from holidays to funding days out. With inflation, energy costs, and rising mortgage bills, this summer spending will come at a time of enhanced vulnerability for many.
“For fraudsters, this provides the perfect opportunity to take advantage of people considering how to make ends meet over the summer months.”
Smart urged consumers who are applying for a loan to check the FCA register to see if a firm is legitimate.
