Lloyds Bank has issued an urgent warning to consumers as the number of ‘advance fee’ loan scams has surged in recent months.
Loan scams happen when a victim is asked to pay an upfront fee - this typically involves replying to an online advert offering a ‘fast loan’ from a company they have never heard of before, though sometimes the fraudster will try to impersonate a genuine firm, according to Lloyds.
The victim will then have their application approved regardless of their credit history, however, before they can receive the loan amount, they are told they must pay an upfront fee by bank transfer.
Once this fee is paid, the fraudster may even ask for further payments.
Eventually, the victim does not hear from the company again and the loan is never received, and their upfront fee payment is lost.
Reports of this type of scam have increased by more than 90 per cent already this year, with the number of cases continuing to rise sharply.
Lloyds Bank said the average amount lost by victims is £231.
How the scam works
You are usually contacted after searching online for a loan and entering your contact details onto a website that looks professional.
The scammer may pretend to be a representative from a genuine company and might send you documentation to make it appear legitimate.
You’ll be approved for a loan, but before the money is released, the fraudster will invent a reason why you need to pay an upfront fee.
They might continue to ask for more payments to try and get as much money as possible before you become suspicious.
Some common reasons given by scammers for these payments in advance include:
- Payment release fee
- Verification fee
- Loan company fee
- Processing fee
- Guarantor fee
- Tax payment
Commenting on the increase in loan scams, Liz Ziegler, Retail Fraud & Financial Crime Director, Lloyds Bank, said: “Organised crime gangs will ruthlessly exploit any change in consumer behaviour. We saw that during the pandemic with the surge in purchase scams as certain goods became scarce and more people shopped online.
“Now, as living costs rise, 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 a poor credit score or may already be in financial difficulty."
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 lots of organisations that can help, and it always makes sense to speak to your bank first.”
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