The rising cost of living means more people face increasing financial stress this Christmas. With the incidence of loan fee fraud – in which a consumer pays a fee for a loan they never receive – already rising, new research from the Financial Conduct Authority (FCA) highlights a heightened risk to vulnerable consumers.
The research reveals the impact of pressure tactics loan scammers employ, as 64% of consumers feel time pressure leads to poorer and riskier choices. The research also reveals that 41% of Christmas shoppers say they regret last-minute purchases.
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.
According to the FCA, two in five 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 one in eight say they plan to take out a loan this year to support their Christmas spending, making them susceptible to loan fee fraud.
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 on its website, along with the FCA Register, before accepting.
Mark Steward, Executive Director of Enforcement and Market Oversight at the 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.”