Hardened families are set to lose money in a fast loan scam that has grown thanks to the cost of living crisis. And cases of people being trapped have increased so much that Lloyds Bank has warned customers to be on their guard against fraudsters.
And the Financial Conduct Authority has also warned people to be wary of out-of-the-box text, email or phone loan offers offering access to quick cash. The scam works like this:
- Scammers set up online advertisements for fake companies or pose as real companies offering fast loans;
- Struggling households are tempted by these ads because they offer a short-term solution to cash flow problems;
- The fake loan is “approved” by the crooks;
- The victim is then asked to send cash by bank transfer to reserve the loan;
- The victim never receives the loan, and once the money is received, the scammers disappear.
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Fraudsters can ask for more money until the victim becomes suspicious – and people falling for the trap have risen 90% so far this year compared to the first five months of 2021, Lloyds claiming that the average victim loses £231.
The reason given for the prepayment may vary. Some of the common reasons given by scammers include verification fees, processing fees or guarantor fees and as always with scams, criminals know how to appear genuine.
Liz Ziegler, director of retail fraud and financial crime at Lloyds Bank, said: “Organized crime gangs will ruthlessly exploit any change in consumer behavior. As the cost of living increases, fraudsters are increasingly turning to advance fee scams.
“They know that some people will need more support with their money, and victims in these cases often have poor credit or may already be struggling financially. The important thing to remember is that a genuine loan company will never ask for an upfront payment before releasing the funds.”
Between April 2020 and March 2021, Action Fraud received 91,593 reports of application fraud, including advance fee schemes.
A total of £2.35bn was lost to fraud in 2021, according to Action Fraud.
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What to do if you think you have been scammed?
- If you responded to a scam, end all contact immediately and do not communicate with the caller again
- Call your bank directly and cancel any recurring payments – or most people can call a new hotline set up to report scams on 159
- Report the scam to the police via Action Fraud on 0300 123 2040, or report it anonymously on the Action Fraud website.
- If you need further help, contact Citizens Advice Scams Action via the Citizens Advice website or call their Scams Action helpline on 0808 250 5050.