Loan fee fraud is becoming more common ahead of Christmas as two-thirds of parents brace for spending above their means, the UK’s Financial Conduct Authority (FCA) has warned.
According to a new research conducted as part of the watchdog’s latest loan free fraud campaign, many UK households are experiencing tremendous financial stress and are forced to resort to borrowing to cover the cost of Christmas – something that loan fraudsters are well aware of and looking to exploit at every step.
The FCA revealed that almost half of UK adults (47%) are finding it difficult to meet their spending expectations and provide for loved ones. This number jumps higher (64%) for households with children under 18.
This has led to over a quarter of parents (29%) considering borrowing or having borrowed money already to cover their Christmas expenses, with the average borrowing sum rising from £305 last year to £412 today.
When loan fee fraud occurs, a consumer is tricked into paying a fee for a loan that they never receive, losing around £255 on average. To bring the chance of scams to a minimum, the FCA has raised awareness by introducing a three-step authentication list that consumers can use to protect themselves.
The first step requires constant vigilance when it comes to being cold called or emailed, as often this could be a scam. The second step is to always be careful when asked to pay an upfront fee, as this could also be a potential cause for suspicion. The final tip is to remain mindful in situations where someone is asking for a quick or unusual payment.
Therese Chambers, Executive Director of Enforcement and Market Oversight at the FCA, said: “Fraudsters will even take advantage of parents’ desire to give their children a good Christmas. Don’t let them.
“Remember the three-step check and protect yourself and your loved ones from loan fee fraud. If you are cold called or emailed, it could be a scam. If you’re asked to pay an upfront fee, it could be a scam. And if you are asked to pay quickly or unusually, it could be a scam.”
To check if a loan provider is compliant with FCA regulations, consumers can visit the loan fee fraud campaign’s website linked above or search the name of the lender on the FCA’s registry before making a loan application.
To strengthen its efforts against fraud, the FCA has partnered with the Debt Free Advice coalition which supports individuals suffering from financial stress.
Matt Dronfield, Managing Director of Debt Free Advice, added: “As Christmas approaches, families across the country face mounting pressure to keep up with societal expectations, often leading to increased debt and financial strain.
“Many of our clients are already burdened by the weight of utility bill debt, imposed by the ongoing cost of living crisis. Holiday-induced debt can have far-reaching consequences, affecting families’ financial stability, mental health, and overall well being.”