Lloyds Bank has issued an urgent warning to consumers as the number of ‘advance fee’ loan scams has risen in recent months. Loan scams occur when a victim is asked to pay an upfront fee for a loan. They will usually respond to an online ad for a “quick loan” from a company they’ve never heard of before, although sometimes the scammer tries to impersonate a real company.
They will have their application approved regardless of their credit history. Before receiving the loan, they are told that they must pay an initial fee by bank transfer. Once these fees are paid, the fraudster can even request further payments. Eventually, the victim hears nothing from the company and the loan is never received.
Reports of this type of scam have already increased by more than 90% this year, with the number of cases continuing to rise sharply. The average amount lost by victims is £231.
How it works:
- You are usually contacted after researching a loan online and entering your details on a professional looking website.
- The scammer may pretend to be a representative of a genuine company and may send you documents to make it appear legitimate.
- You will be approved for a loan, but before the money is released, the scammer will invent a reason why you will have to pay an initial fee.
- They might keep asking for more payments to try and get as much money as possible before you become suspicious.
Some common reasons given by scammers for these upfront payments include:
- Payment Release Fee
- Verification fees
- Loan company fees
- Processing fee
- Guarantor fees
- payment of tax
Liz Ziegler, Director of Retail Fraud and Financial Crime, Lloyds Bank, said: “Organized crime gangs will ruthlessly exploit any change in consumer behavior. We’ve seen it during the pandemic with the upsurge in shopping scams, some products becoming scarce and more and more people shopping online.
“Today, 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 in financial difficulty.
“The important thing to remember is that a genuine loan company will never ask for an upfront payment before releasing the funds. If you are worried in any way about your finances, there are many organizations that can help you, and it is always makes sense to talk to your bank first.