Warning against scammers targeting Christmas because one in eight scams is a loan scam
Scammers try to steal two-thirds of average consumers’ spending on Christmas gifts.
About one in eight scams are “loan fee fraud” when consumers are asked to pay an upfront fee for a loan or credit that they never receive afterwards.
The Financial Conduct Authority (FCA) has issued a “three wise warnings” to protect people from loan scammers this holiday season.
This is because loan fee fraud was the third most reported scam last December according to the FCA.
There are thousands of different types of scams involving a wide range of services such as investing, pensions, and online trading, but the most common is a phone call offering something so tempting that the reckless ‘brand’ or the victim falls into the trap. .
This involves people asking a consumer to pay an upfront fee – usually between £ 25 and £ 450 – when they apply for a loan or credit they will never get.
Their research shows that people spend an average of £ 355 on Christmas gifts.
But with the average loan fee scam costing consumers £ 220 each, they could lose almost two-thirds (62%) of what would have been under their tree.
In addition, this Christmas, 25% of people plan to spend more years than “normal” years – reaching a third (34%) of those who have encountered financial difficulties as a result of the pandemic, such as being on leave. or loss of income, which means the blow could be even harder.
The FCA warning asks people to ask themselves if they are being asked to pay fees up front, if they are forced to pay promptly, and if they are required to pay by some unusual method.
Two-thirds (66%) of people are convinced they could spot a loan scam if approached by a scammer, but more than one in 4 (28%) would consider paying a fee first to get it. a loan – one of the main warning signs of loan fee fraud, according to the FCA.
This figure rises to 54% for 25-34 year olds, who are most likely to be affected by this type of fraud.
The FCA warns that the financial impacts of the Covid-19 pandemic could also further increase the amount lost to loan fee fraud in December.
The study shows that 60% of people who have suffered a job loss, leave, workload or pay cut due to the pandemic will go into debt to pay for their extra party expenses, which means that ‘they may be more vulnerable to loan fraud.
Almost two-thirds (65%) of people who have encountered financial difficulties due to Covid-19 say falling for a scam on Christmas would be worse than at any other time of the year, and 64% say being scammed in 2020 would be worse than any other year.
Mark Steward, Executive Director of Enforcement and Market Watch for FCA, said: “This December will be different from previous years in many ways, and we know that many people will be entering the holiday season. and will end the year after being negatively affected financially by the pandemic.
“Unfortunately, fraudsters will look for every opportunity to exploit vulnerable people. Loan fee fraud is a problem that should not be overlooked. At the end of a tough year, anyone looking for a loan for any reason should watch out for red flags and look for warning signs.
“It’s always best to check with the FCA registry to make sure you’re dealing with an authorized company, before taking out a loan. Don’t give crooks what they’re asking for this Christmas! ”
Gareth Shaw, head of money with consumer organization Which ?, said: “The coronavirus crisis has created the perfect environment for scammers, with crooks using callous and sophisticated tactics to exploit people’s financial vulnerabilities. , especially in the run-up to Christmas.
“We advise consumers to be very careful before taking out a loan, especially as fraudsters seek to take advantage of the current uncertainty by any means possible. Be sure to do your research on the lender and avoid if they charge an upfront fee or if they are not registered with the financial regulator.