Lloyds Bank has issued an urgent warning to consumers as the number of ‘advance fee’ loan scams has increased in recent months.
Loan scams occur when a victim is asked to pay an upfront fee – this usually involves responding to an online advertisement offering a “quick loan” from a company they have never heard of before, although sometimes the scammer tries to impersonate a real business, according to Lloyd’s.
The victim will then have their application approved regardless of their credit history, however, before they can receive the loan amount, they are told that they have to pay an initial fee via 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, and the initial fee payment is lost.
Reports of this type of scam have already increased by more than 90% this year, with the number of cases continuing to rise sharply.
Lloyds Bank said the average amount lost by victims was £231.
How the scam 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 fee
- Processing fee
- Guarantor fees
- payment of tax
Commenting on the rise in loan scams, 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 struggling financially. »
She added: “The important thing to remember is that a genuine loan company will never ask for an upfront payment before releasing the funds.
“If you’re concerned in any way about your finances, there are plenty of organizations that can help, and it always makes sense to talk to your bank first.”
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