Cashfloat.co.uk, one of the UK’s leading online unsecured direct lenders, reported a record increase of over 270% in loan fee fraud attempts since the start of the coronavirus pandemic, with an average loss of £250 per victim.
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The significant increase in loan fee scams can be attributed to two main factors:
1. COVID-19 – Due to the crisis brought on by the pandemic, more people are desperate for a loan due to salary cuts, job losses, and reduced work. Fraudsters are exploiting this by promising people a loan after other lenders have declined them.
2. Reduced lender activity – More unsecured lenders are now in administration. Those still in operation are working at a reduced capacity to minimise risk on loans being taken during these uncertain times.
Following an exhaustive investigation, the Cashfloat security team found that over 95% of loan scam victims applied on a loan broker site before being contacted by scammers. Their research concluded that scammers, suspected to be based in India, use the confidential data they obtain from broker sources to contact loan applicants and ask them to pay loan origination fees, while pretending to be calling from Cashfloat.
One victim, who did not wish to be named, said:
“Recently, I had made some applications on broker websites, and that’s why I was so easily fooled. If I hadn’t been applying for loans online, I would have been more suspicious.”
In 2018, the FCA reported that 72% of the public are unaware of loan-related scams. Cashfloat has made it their mission to raise awareness of this type of fraud to protect potential future victims.
Cashfloat has responded by reporting each case to the relevant authorities, such as the FCA, Action Fraud and the Citizens Advice Consumer Service. They’ve also released call recordings of scammers in action on their Fraud Prevention Centre, which is updated regularly. Lastly, they’ve published guidance on their website and social media accounts on how to spot loan fee scams. In summary, they advise all consumers to:
- Apply for loans with a direct lender only, not a broker
- Never respond to callers offering loans over the phone
- Never pay upfront fees for a loan
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