As households grappling with high living costs turn to loans to help cover summer spending, the FCA is warning people of the rising risk of loan fee fraud.
Loan fee fraud, where a consumer pays a fee for a loan they never receive, typically results in a £260 loss. But according to the Financial Conduct Authority (FCA), this type of fraud has been “growing” year on year and generally peaks over summer.
Research conducted by the financial watchdog showed a 26 percent increase in complaints from consumers who had fallen victim to the scam last summer compared to 2021.
This year, it warns that the rising cost of living, coupled with summer spending pressures, could “increase” the risk further.
Steve Smart, executive director of enforcement and market oversight at the FCA, said: “For many, summer brings with it the chance to relax and unwind but it also brings with it financial pressures – from holidays and festivals to funding days out, or out of term childcare for parents.”
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However, he noted: “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.”
He added: “Follow our three-step check for loan fraud for how to spot the signs of loan fee fraud, and if you need to apply for a loan, check the register to see if the firm is legitimate. Don’t get burned by scams on your summer holidays.”
The FCA’s three-step warns people could be facing a scam if:
- They are cold-called or emailed
- They are asked to pay an upfront fee
- They are asked to pay quickly or unusually.
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Over half of UK adults (55 percent) surveyed by the FCA said they were more worried about personal finances this summer than they were last year.
Summer-related spending has only compounded this, with entertainment costs (24 percent), and summer holidays (22 percent) being the next most prominent financial worries.
And while 46 percent of UK adults have gone or plan to go away this year on a summer holiday, more than a third (35 percent) are worried about how they are going to pay for it.
Up to 24 percent of consumers are turning to credit or loans to fund additional summer-related spending, leaving loan fee fraudsters using this as an opportunity to steal money.
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If consumers need to apply for a loan, the FCA urges them to check the information on the FCA’s website.
This includes checking the FCA Register to find out if the firm they are applying to for a loan is authorised. If the firm is not authorised, it is likely to be a scam.
Are you worried about your finances or facing another difficulty? Send us your stories at firstname.lastname@example.org.
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