Citizens Advice: What is loan free fraud?

Loan Free Fraud

Loan free Fraud - Credit: Citizens Advice North Herts

Citizens Advice North Herts is working to raise awareness of loan free fraud.

In 2020, the Financial Conduct Authority recorded a 32 per cent increase in reports of loan fee fraud to their contact centre per month during the festive period.

Within the last year victims have reported an average loss of £274 per fraud. However, during the festive period this increased to an average of £355 as people’s spending increased, making them more likely to seek credit from loan providers. 

Citizens Advice has teamed up with the FCA to raise awareness about these scams. 

But what is loan fee fraud? 

A loan fee scam happens when you’re asked to pay an upfront fee for a loan which you will never receive.  

What are the signs of a loan fee scam? 

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There are several signs that might mean a scam: 

You’ve been contacted out of the blue by text, email or phone and offered a loan 

You’ve been asked to pay an upfront fee for a loan in an unusual way — Western Union, iTunes vouchers or directly into a bank account 

You’ve been told the fee is refundable and will be used as a deposit, administrative fee or because you’ve got poor credit history 

You’re pressured to pay the loan quickly 

You’re asked to make more payments before receiving the loan 

Ultimately, you never receive the loan. 

What should I do if I’ve been scammed? 

If you’re looking for a loan and are approached by someone offering one, before you do anything check the FCA’s website to see if they are a registered company and what they are regulated to do. If someone is asking you to pay upfront for a loan — it’s likely a scam and you should seek a loan from elsewhere. 

If you are scammed, our #ScamsAction service can help. The Citizens Advice Scams Action service provides free, impartial and confidential advice on scams. As well as advice on the scams themselves, we can also help you with other issues such as debt or housing. 

The Financial Conduct Authority is the conduct regulator for 51,000 financial services firms and financial markets in the UK. In addition, they provide advice to consumers on a wide range of financial scams and provide complaint services.  

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