Borrowers warned of rise in ‘advance fees’ scams with over £700 lost on average and Londoners more likely to fall victim – Lloyds Bank
The rising cost of living has lead to 82 per cent increase in financial scams that target victims by charging fees for products and services that do not materialise, according to Lloyds bank.
Victims lost £711 on average, and although the amount lost is lower than £1,194 recorded the previous year, the bank said fraudsters appeared to be pursuing a higher volume of lower value scams in the current economic environment.
Fake ads for loans, jobs and rental properties are among the most common tactics currently being used by criminals with reports of ‘loan fee’ scams doubling over the last year.
London saw the highest number of cases of advance fee scams in the UK last year, with the West Midlands was a particular hotspot as, relative to population size, the number of cases reported was around 20 per cent higher than the national average.
Those aged between 25 and 34 are most likely to fall victim, followed by 35 to 44 year olds; those two age groups make up around half of all victims.
The rise of the fast loan scam
Reports of loan fee scams have more than doubled over the last 12 months, up by 105 per cent compared to the previous year, with the number of cases continuing to rise sharply.
The average amount lost by victims last year was £214.
Victims will typically reply to an online advert for a ‘fast loan’ from a company they have never heard of, though sometimes the fraudster will try to impersonate a genuine firm.
They will have their application approved regardless of their credit history. Before they receive the loan, they are told they must pay an upfront fee by bank transfer.
Once this fee is paid, the fraudster may even ask for further payments. Eventually, the victim does not hear from the company again and the loan is never received.
Some common reasons given by the scammers for these payments in advance include:
- Payment release fee
- Insurance fee
- Verification fee
- Loan company fee
- Processing fee
- Guarantor fee
- Tax payment
Liz Ziegler, fraud prevention director at Lloyds Bank, said: “The important thing to remember is that a genuine lender will always conduct thorough credit checks prior to agreeing a loan and won’t ask for an upfront payment before releasing the funds. If you’re concerned in any way about your finances there are lots of reputable organisations that can help, and it always makes sense to speak to your bank first.
“Fraudsters will ruthlessly adapt to any changes in consumer behaviour and, with the increased cost of living putting more pressure on people’s finances, the recent surge in advance fee scams targeting those on low incomes or with a poor credit history is alarming.
“The abundance of these fake online ads reinforces the importance of the government’s Online Safety Bill to ensure social media sites and search engines stamp out fraudsters operating on their platforms.”
How to stay safe from loan fee scams
- Do your research to ensure you’re dealing with a real company. You can check using the FCA’s website – only contact firms using the details listed there.
- Avoid any company that says they can guarantee you a loan regardless of your credit status. A reputable lender will always conduct a thorough credit check.
- You shouldn’t be asked to pay an upfront fee for a loan from a genuine company. If you are, it’s likely a scam.
- If you’re worried about your financial situation, speak to your bank first. They should be able to help, or point you towards a reputable organisation that can.