UK FCA warns everyone about Christmas loan fee scams

As the holiday season approaches, the UK’s Financial Conduct Authority (FCA) reminds everyone about the increasing Christmas loan fee scams that target households struggling with the high cost of living.

The FCA published this recent warning after 40% of UK adults had concerns about their Christmas spending budget. Moreover, 52% of parents with children under 18 also express their worries about the holiday season being spent on their loved ones.

These concerns and pressure to meet seasonal expectations prompt many individuals to consider loans, with over a quarter (29%) of British parents reportedly borrowing money or planning to do so during this part of the year. The FCA shared a tally that the average amount borrowed has increased significantly, from £305 in 2022 to £412 this year.

 

Fraudsters take advantage of the season to deploy their Christmas loan fee scams.

 

The FCA explained that these malicious entities would exploit these financial strains to endorse their Christmas loan fee scams to households with tight budgets. In this type of scam, the scammers use their malicious app to promise a quick and easy loan but pay an upfront charge as a ‘deposit’ or ‘fee.’ However, these promised funds do not materialise, stealing the loaners’ deposit funds.

Last year, the FCA reported a 21% year-on-year increase in loan fee fraud instances from November 2021 to October 2022. In addition, a recent tally emphasises that falling victim to such scams typically results in a loss of £255.

On the other hand, the FCA recommends a three-step check for individuals considering loans to protect themselves from potential scams. First, individuals should be cautious if they receive unsolicited calls or emails offering loans. Second, the upfront fee is a major red flag for loan apps. Lastly, individuals should be vigilant if pressured to make payments immediately or under unusual circumstances.

As the holiday season approaches and financial pressures worsen, individuals and families should exercise caution and stay vigilant against fraudulent schemes, especially in the UK. Therefore, consumers should adhere to the three-step check to protect themselves and their loved ones from falling victim to various Christmas loan fee loan scams during this festive period.