Festive shoppers at rising risk of loan fee scams as fraudsters pile on the pressure at Christmas

• The FCA warns of the increasing risk of loan fee fraud this Christmas, with cases already up by a fifth on last year.
• FCA research shows with the rising cost of living impacting consumers’ finances, consumers may be more susceptible to loan fee fraud over the festive period.
• The research reveals the impact of pressure tactics loan scammers employ, as 64% of consumers feel time pressure leads to poorer and riskier choices.
• Time pressure at Christmas already leads to regrets from consumers. 41% of Christmas shoppers regret last minute purchases.
• In the face of this risk, FCA asks consumers to check the FCA’s register if they are asked to provide an upfront payment for a loan, often the sign of a scam.

As consumers across the country are affected by the rising cost of living, more will face increasing financial stress at Christmas this year.

With the incidence of loan fee fraud – where a consumer pays a fee for a loan they never receive – already rising, the FCA’s latest research highlights a heightened risk to vulnerable consumers of being pressured into falling for this scam at Christmas.

Rising financial stress places more at risk of loan fraud tactics this year

The FCA typically receives an increase in reports of loan fee fraud over the festive period. It has already risen in frequency in the last year (November 2021 to October 2022), with the number of cases reported rising by 21% compared to the previous year.

This Christmas, consumers are under even more financial pressure than usual, which is likely to leave people more vulnerable to fraudsters’ tactics.

Two in 5 of those celebrating the festive period feel pressured by family and friends to maintain their usual Christmas spending this year; a third of these are worried about how they will afford it amidst the cost of living crisis. More than 1 in 8 say they plan to take out a loan this year to support their Christmas spending, making them susceptible to loan fee fraud.

Fraudsters seek to pile on time pressure at Christmas

One frequently used tactic by loan fee fraudsters is to pressurise consumers, seeking fast payment for a non-existent loan.

Making decisions under time pressure is all too familiar to last-minute Christmas shoppers - as are the consequences. While 87% of Christmas shoppers undertake last minute purchases, 41% have bought a last minute present they regret. Time limited offers are also highly effective.

Nearly half of Christmas shoppers would be more likely to buy a present with a limited time offer, with 32% likely to place a deposit to secure the present. Despite the effectiveness of these offers, two-thirds (64%) of consumers acknowledge that time pressure leads to making poorer decisions and taking riskier choices, typically reducing the time spent researching choices. This is what loan fee fraudsters use to their advantage.

The financial impact of falling prey to scammers and illegal lenders can have a devastating impact on families’ budgets at Christmas. The average loan fee fraud costs consumers £260, more than half the total amount people expect to spend on Christmas presents this year (£444).

With nearly two-thirds of consumers unaware of what loan fee fraud is (64%), and just 1 in 5 (22%) able to identify all its warning signs, the FCA is launching its latest campaign to arm consumers with the knowledge and tools they need to avoid loan fee fraud this Christmas.

The FCA is calling on those who are contacted about a loan, or asked for an upfront payment, to be vigilant and check the loan fee fraud information[1] on our website, along with the FCA Register[2], before accepting.

Mark Steward, Executive Director of Enforcement and Market Oversight, FCA, said:

'This Christmas period is going to be tough for many consumers, and those who have been hardest hit by the rising cost of living will understandably be anxious about meeting the additional expenses that Christmas brings. Some consumers may be tempted to take out loans to meet these extra costs. Unfortunately, this is where loan fee fraud scammers and illegal lenders see an opportunity.

'At a time of heightened stress and pressure, scammers and illegal lenders will rush consumers into bad-decision making. Be aware of red flags – such as being asked for a fee or being asked to pay in an unusual way. And if you are considering taking out a loan, please pause and check the FCA’s Register to make sure you are dealing with a legitimate lender. Don’t let scammers be the ones enjoying your Christmas this year.'

The most commonly used tactics of loan fee fraud to be aware of include:

• Having made several loan applications online, you are then contacted out of the blue by text, email or phone and offered a loan.
• Being asked to make an upfront payment into a bank account, or transfer money via an unusual method.
• Scammers may claim that the fee is refundable and will be used as a deposit, administrative fee, insurance or because of bad credit history.
• You may be put under pressure to pay the fee quickly.
• Once the first payment has been made, the scammer might contact you again to ask for more payments before they can give you the loan.
• Even though you make the payments, you never receive the loan.

Notes to editors

1. The FCA’s consumer research was conducted by Opinium, with a nationally representative sample of 2,000 UK adults interviewed between 11 and 15 November. Unless otherwise stated, all data refers to this survey. 
2. Find out more information about the FCA[3].