Loan Fee Fraud: The £3.5 Million a Year Scam

Posted by Jamie Mackenzie Smith in Identity Theft on 8 June 2018

For people facing financial hardship, sometimes taking out a loan to tide things over can seem like the most viable solution. But if you’re out of work or have a lower-than-average credit rating, it can be harder to get credit from mainstream lenders and mean that more expensive forms of finance in the sub-prime market are the only viable option. It often feels like a hopeless situation.

Just as all seems lost, along comes a finance company, calling from out of the blue, claiming they’ve got a loan that you’re likely to be accepted for at a decent APR. All you need to do is make a one-off refundable insurance payment and the loan is yours. But the loan never arrives and you never get your insurance payment back. That’s exactly how Loan Fee Fraud works.

What is Loan Fee Fraud?

Loan Fee Fraud is not a ‘new’ scam. You can find news stories about it going back a few years in various shapes and forms (sometimes it’s a loan, sometimes it’s a job offer), but according to official figures from the Financial Conduct Authority (FCA), reported cases went up by 44% in 2017, costing members of the public a total of £3.5 million, with fraudulent requests for amounts ranging anywhere between £25 and £450.

If it sounds familiar, that’s because there are one or two similarities between how the scam is being carried out and how PPI was being mis-sold a few years ago: many people were lead to believe that buying insurance for the loan at the point of sale was necessary for their application to go through or would improve their chances of being accepted. Because most lenders that were subsequently found to have mis-sold PPI were regulated by the FCA, millions of borrowers were able to reclaim any money owed and tighter regulations were brought into place to prevent consumers being misled in the same way in the future.

When you take out a loan from an unregulated lender, you get no such guarantee.

The main difference between the two is that Loan Fee Fraud is a scam – pure and simple. Not only does it not improve your chances of getting accepted for credit, but there isn’t actually a loan at the end of it. In some cases the scammers may ask for several payments to be made, alleging that the loan cannot be released until these payments are made, so not only do you get the loan amount you need, but you’re also left out-of-pocket for any amount you paid as well.

It’s important to remember that there may be some genuine instances where you are required to make a payment before you can be granted credit, such as an Arrangement Fee when you apply for a mortgage or if you need to pay a deposit while taking out finance. If you’re in any doubt at all about whether you can trust a lender, check to see if they are on the Financial Services Register and authorised by the FCA before applying.

What to look out for:

  • Any fees that are expected to be paid upfront
  • Anything that suggests you will be more likely to get accepted for credit
  • Being asked to pay in an unusual way (e.g. in iTunes vouchers or a money transfer service)
  • Firms not authorised by the FCA

How to improve chances of getting accepted for credit

This type of fraud specifically targets people who may have Adverse Credit on their report and may struggle to get accepted for credit by mainstream lenders. While the sub-prime market usually offers higher rates of interest than most mainstream forms of credit, you should never have to risk applying for any form of loan that is not regulated by the FCA.

Without FCA-authorisation you’ll have no protection from the Financial Ombudsman Service in the event of things going wrong, and you’ll be a lot less likely to be able to reclaim any money lost.

If you are struggling with debt, see our Debt Advice Centre for free, impartial guidance.

For your best chances of getting accepted for any kind of credit, it’s important that you check your Credit Report first, so you can see what lenders see. If there is anything appearing on your Credit Report that would cause a lender to think twice before loaning you money, you will see it there first. There are a number of things that could affect your ability to get credit, but until you check your Report, you’re going in blind.

If you haven’t already, you can try checkmyfile FREE for 30 days, then for just £14.99 a month afterwards, which you can cancel at any time.

How To Check if Someone Is Using Your Identity For Fraud

Scams and fraudsters may have evolved to become more sophisticated over time, but when it comes to fighting back, one piece of advice has stayed true: If you’re concerned that you might have fallen victim to identity fraud or want to better protect yourself against it, your Credit Report is one of the best places to turn.

Published on 3 Apr 2019 by Paul Anderson-Riley

Full Article

Affected by the Marriott Hack? Here’s What To Do

If you’re one of the 500 million consumers to have stayed in a Marriott-owned Starwood chain hotel in the past four years, there’s a chance your personal information could have been compromised in what could be the second biggest ever data breach.

Published on 30 Nov 2018 by Jamie Mackenzie Smith

Full Article

Tesco Online Grocery List Disappears

After well over 10 years of using Tesco’s online grocery service, all of sudden, all of my Tesco order history has disappeared, alongside all the information stored in My Favourites – purchases made in-store and online over the past 13 months, My Usuals, and My Shopping Lists.

Published on 9 Oct 2018 by Barry Stamp

Full Article

Are linked addresses on your credit file a bad thing

Your Credit Report can surprise you: it can include reference to an address you have long-forgotten about or sometimes even an address you have never heard of, which is one of the reasons it’s important to check in every now and then.

Published on 30 Jul 2018 by Ian Carpenter

Full Article

Protecting yourself against identity theft online

Modern day fraudsters are now able to use the internet as a helpful tool to acquire a vast amount of information about an individual just from using their name. From this, they start to build a portfolio of data that they can then use to obtain credit, bank accounts and sign up for other services. By following a few simple steps you can help to reduce the risk of being exposed to a fraudster online.

Published on 22 May 2018 by Paul Anderson Riley

Full Article

Personal Data in the Wake of Facebook/Cambridge Analytica

Strange as it might sound to some, huge numbers of people routinely complete online surveys through Facebook to find out which football player they are most like, which Hogwarts house they should be in or how much money they will be earning in 2050. The truth is, every time you volunteer seemingly innocuous information or consent to share profile information with an app, your data is probably going somewhere to be used for another purpose.

Published on 17 Apr 2018 by Paul Anderson-Riley

Full Article

Identity Fraud: What To Do If It Happens To You

Year on year, there has been a substantial rise in the number of identity fraud cases being reported to organisations such as Cifas, the UK’s fraud prevention service. It’s no real surprise when you consider the crime can be committed from the comfort of someone’s home without ever having to risk showing their face.

Published on 6 Feb 2018 by George Coburn

Full Article

What's a Politically Exposed Person (PEP) & Why is it on my Report?

PEP stands for Politically Exposed Person, which would typically relate to an individual who has a prominent public title or function. If you receive this classification, often you will have to undergo additional security checks when applying for finance. Your credit file will tell you if you have been identified as a PEP, however for most people it isn’t something they’ll need to worry about.

Published on 8 Jan 2018 by Paul Anderson-Riley

Full Article

Brits continuing to fall for HMRC and Apple gift card scam

At the face of it, it seems a bit odd that the company responsible for collecting taxes would request payment from individuals in the form of an Apple iTunes gift card, but according to Action Fraud, this scam has continued to be profitable for fraudsters. The scheme first came to light in May last year and Action Fraud have received hundreds of complaints since then.

Published on 30 Jan 2017 by George Coburn

Full Article

Yahoo’ve been hacked – Yahoo in largest ever reported data breach

In the last two years, we have already been alerted to data breaches at Three Mobile, Tesco Bank, TalkTalk, Morrison’s, Steam and Sage, amongst others. The scale of these hacker attacks have varied. But none have come close to the newest report.

Published on 16 Dec 2016 by Ben Tumilty

Full Article
keyboard_arrow_left

keyboard_arrow_right

We are rated number 1 for customer service on