Lloyds Bank has issued an urgent warning to all banking customers following a new report which indicates that the number of ‘advance fee’ scams has surged over the last 12 months. These are scams which involve people being asked to pay fees upfront for goods or services such as loans that never materialise.
The number of ‘advance fee’ frauds reported to Lloyds Banking Group by customers jumped by 82 per cent across 2022, compared with 2021. People with a poor credit history may be particularly likely to be targeted as households continue to feel the squeeze from cost of living pressures in the first few months of the new year.
The average amount lost by victims in 2022 was £711, lower than an average of £1,194 in 2021, suggesting fraudsters may be pursuing a higher volume of lower value scams in the current economic environment.
Lloyds said its figures suggest people living in deprived areas may be particularly likely to report being scammed in this way.
People aged 25 to 34 were the most likely age group to report falling victim, followed by those aged 35 to 44.
Loan fee scams are a particular concern as fraudsters will often target people on low incomes or with a poor credit history, Lloyds added.
It said reports of loan fee scams have more than doubled over the past 12 months, compared with the previous year. The average amount lost by victims last year was £214.
How does an ‘advance fee’ scam work?
Victims will typically reply to an online advert for a ‘fast loan’ and are told they must pay an upfront fee by bank transfer.
Once the fee is paid, the fraudster may ask for further payments. Eventually, the victim does not hear from the company again and the loan is never received.
In one case seen by Lloyds, a woman was searching online for loans after receiving a bill for car repairs. She then received an unsolicited WhatsApp message from someone offering her a £1,300 loan without credit checks.
She was told that, to secure the loan, she would need to pay the first month's repayment of £120 upfront via bank transfer, which she did.
Shortly after, she was asked to pay an additional £199 for "payment protection insurance" in case she became jobless.
The attempted payment for £199 was blocked by the bank and the person she was dealing with on WhatsApp asked her to send the money to another account.
The woman became suspicious and asked for the initial £120 payment to be returned - but the money had disappeared.
Common reasons given by the scammers for these payments in advance include:
- Payment release fee
- Insurance fee
- Verification fee
- Loan company fee
- Processing fee
- Guarantor fee
- Tax payment
Liz Ziegler, fraud prevention director at Lloyds Bank, said: “Fraudsters will ruthlessly adapt to any changes in consumer behaviour and, with the increased cost of living putting more pressure on people’s finances, the recent surge in advance fee scams targeting those on low incomes or with a poor credit history is alarming.
“The important thing to remember is that a genuine lender will always conduct thorough credit checks prior to agreeing a loan and won’t ask for an upfront payment before releasing the funds.
“If you’re concerned in any way about your finances there are lots of reputable organisations that can help, and it always makes sense to speak to your bank first.”
She added: “The abundance of these fake online ads reinforces the importance of the government’s Online Safety Bill to ensure social media sites and search engines stamp out fraudsters operating on their platforms.”
Top tips to stay safe from loan fee scams:
- Do research to ensure you are dealing with a real company - you can check firms using the Financial Conduct Authority's website here
- Remember that reputable lenders will conduct a thorough credit check before offering a loan
- You should not be asked to pay an upfront fee for a loan from a genuine company. If you are, it may be a scam
- If you are worried about your financial situation, talk to your bank first - they should be able to help or point you towards a reputable organisation that can
To keep up to date with the latest cost of living news, join our Money Saving Scotland Facebook page here, or subscribe to our newsletter which goes out four times each week - sign up here.
READ NEXT
How to quickly check for unclaimed benefits or discounts online within minutes
Older people making new claim for Pension Credit could also qualify for £900 cost of living payment
New £400 energy bill help for people in park homes or off-grid will be paid by local authorities
New £200 Alternative Fuel Payment update for off-grid energy users due money next month
Full list of new DWP and HMRC weekly payment rates from April
