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Loan Fee Fraud

A type of advance fee fraud, loan fee fraud takes place when you are offered a loan either as a result of submitting an application or out of the blue, and asked to pay an upfront arrangement fee to secure it, only to find that you have been defrauded out of your money.

Whether you are told that the fee is refundable and used as an admin charge, deposit or insurance payment – or alternatively because you have a poor credit history – you will generally be asked to pay the fee into by direct bank transfer or another unusual method. You may also be pressured into paying the fee quickly in order to secure the loan.

People who are being forced into making difficult financial choices, for example when the cost of living is increasing at a faster rate than usual, can be particularly vulnerable to falling victim.

The risks

  • Losing money which you have paid as a ‘fee’ for a loan or credit you do not receive.

Protect yourself from loan fee fraud

  • When applying for a loan, deal only with lenders authorised by the Financial Conduct Authority (FCA). You can check to see if the firm is regulated on the FCA’s Financial Services Register. You will not be able to seek help from the Financial Ombudsman Service if you borrow from an unregulated firm and things go wrong.
  • Check that the firm’s contact details match the details the Financial Services Register.
  • Use the contact details listed on the Financial Services Register, rather than a direct line or email address given to you, in case fraud is being attempted.
  • If the Financial Services Register does not list the lender’s contact details – or the lender claims that they are out of date – call the Financial Conduct Authority’s Consumer Helpline on 0800 111 6768.

How you know if you are dealing with an authorised firm

If a firm authorised by the Financial Conduct Authority requests payment of an upfront fee before providing you with a loan, they should send you a notice setting out certain details including:

  • The legal name of the firm as it appears on the Financial Services Register.
  • A statement that the firm is acting as a credit broker.
  • A statement specifying if you need to pay a charge for the firm’s services.
  • The amount of the charge (or how it will be calculated), when the firm will take payment from you and how you will pay.

You will be required to respond to the notice, stating that you have received and understood it.

 

See Also...

Protecting Yourself 49

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