With a Christmas marred by the cost of living crisis, there are fears that more people could lose money to scammers offering non-existent loans.

The Financial Conduct Authority said it was receiving an annual increase in reports of loan fee fraud over the festive period.

Loan fee fraud happens when someone pays a fee for a loan they never received – and the FCA fears increased financial stress will expose more people to scammers’ tactics this year .

Emma Francis (pseudonym) fell victim after escaping an abusive relationship where her ex-partner controlled all their money.

The single mum-of-three found herself facing a cashless Christmas and didn’t want to let her kids down.

After researching payday loans, she found a website offering ‘secured’ loans and paid what she thought was a £49 administration fee for a £500 loan.

“After I paid I called them and they told me to go to a bank for a loan,” she told Sky News.

She then looked at the fine print on the website which admitted the company was a “broker, not a lender”.

“The advice they offered me was just one line. Go to the bank. I knew then I wouldn’t get my money back,” she said.

“I was very vulnerable and looking back, I was quite naive about it.

“It was a lot of money and I felt so stupid.”

Read more:
Cost of living advent calendar – how the crisis doesn’t steal Christmas
How The Kitchen Table Project Turned Into A Charity Helping Thousands
Lighting 40,000 Christmas lights in times of energy crisis

Victims lose hundreds of pounds on average

A tactic often used by loan fee scammers is to pressure people looking for quick access to cash – but victims stand to lose an average of £260.

The regulator said the frequency of such scams had already increased over the past year, with the number of reported cases increasing by around a fifth (21%) between November 2021 and October 2022 compared to the same period a year earlier.

Nearly two-thirds (64%) of consumers don’t know what loan fee fraud is.

The FCA asks people to check its register if they are asked to provide an upfront payment for a loan.

Mark Steward, executive director of enforcement and market surveillance at the FCA, said: “This Christmas period is going to be difficult for many consumers, and those who have been hardest hit by the rising cost of life will naturally be anxious to meet the extra expenses that Christmas brings.

“Some consumers may be tempted to take out loans to meet these additional costs. Unfortunately, this is where fraudsters and illegal lenders see an opportunity.

“In a time of increased stress and pressure, scammers and illegal lenders will rush consumers into making bad decisions.”

Ms Francis’ advice was to ‘talk to your kids’.

“I know it sounds silly,” she said, “but kids are a lot more understanding than we think.

“I know my kids would much rather watch a Christmas movie with me than open a big box of presents.”

She also said she doesn’t let Santa take all the credit.

“I tell my kids one present is from Santa and the rest is from hard work from mom,” she added.

“Because how else do you explain that he brought an Xbox to your friend and not to you?”

Click to subscribe to Sky News Daily wherever you get your podcasts

Most Commonly Used Loan Fee Fraud Tactics

• After having made several loan applications online, you are then contacted unexpectedly by SMS, email or telephone and offer you a loan
• Being asked to make an initial payment to 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 due to bad credit history
• You may be pressured to pay fees promptly
• After the first payment is made, the scammer may contact you again to request further payments before they can grant you the loan.
• Even if you make the payments, you never receive the loan