Financial Conduct Authority
Have you been asked to pay an upfront fee when applying for a loan or credit? Find out why this may be a scam and how to protect yourself.
Coronavirus (Covid-19): A major event like coronavirus can start new types of scam activity. Find out about potential scams, how they could affect you, and how to protect yourself.
We are receiving a growing number of reports from consumers who have been asked to pay a fee – usually between £25 and £450 – for a loan or credit that they then never receive.
This is a scam known as ‘loan fee fraud’ or ‘advance fee fraud.
Spot the warning signs of loan fee fraud
- You may have made several loan applications online and then been contacted out of the blue by text, email or phone and offered a loan.
- You may be asked to make an upfront payment into a bank account, or transfer money via an unusual method, for example Western Union or iTunes vouchers.
- The 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.
How to protect yourself
When applying for a loan, you should only deal with FCA authorised firms. If you deal with an unauthorised firm, you won’t be covered by the Financial Ombudsman Service if things go wrong.
- Check our Financial Services Register to see if the firm is regulated by us.
- Check that the firm’s contact details match the details the FS Register.
- Always use the contact details on the FS Register, rather than a direct line or email given to you.
- If there are no contact details on the FS Register, or the firm claims they are out of date, call our Consumer Helpline on 0800 111 6768.
- Read more information on unauthorised firms and individuals and how to protect yourself from scams.
How loan fees work with authorised firms
If you are asked to pay an upfront fee before getting a loan from an authorised firm, the firm should send you a notice setting out certain information. This should include:
- the legal name of the firm as it appears on the FS Register
- a statement that the firm is acting as a credit broker
- a statement saying if you need to pay a charge for the firm’s services
- the amount of the charge (or how it will be calculated), when the firm will take payment from you and how you will pay
You will have to reply to the notice saying that you received it and confirming that you understand what it says.
If you are asked to pay an upfront fee from a firm who doesn’t follow this process, it could be a scam.
If you need advice on borrowing or debt, you can visit the Money Advice Service.
Report a scam
If you think you have been contacted by an unauthorised firm or a scam, then you should report it to us by using our reporting form.
You can also contact our Consumer Helpline on 0800 111 6768.