Experts warn of 900% increase in loan scam victims

Financial experts report a 900% increase in victims of a loan scam, swindling vulnerable Brits out of thousands of pounds

Financial experts at Little-Loans.com have seen a huge increase in consumers falling victim to a scam conning Brits out of thousands of pounds.

The scam has mainly been circulating within the past year and is targeting consumers looking to apply for loans, specifically those seeking high-cost, short-term credit. This means that those falling victim are often financially vulnerable.

The scam, known as cloning, sees the scammers pretending to be representatives from legitimate loan lenders and credit brokers to con unsuspecting customers out of their money – in many instances, up to hundreds or even thousands of pounds.

How many people are being scammed?

Little-Loans.com, a Financial Conduct Authority (FCA) regulated and authorised loan broker, has recently seen over a 900% increase in queries from those being scammed within the past year.

Alex Kosuth-Phillips, the customer services manager at Little-Loans.com explained the rise in victims of the scam.

“This particular scam is not new; however, we have seen a marked increase in the number of reports we are receiving recently from customers who have been on the receiving end of the scam – over 200 in the last month alone. This is a 965% increase from March this year.”

“Just three months ago, we were seeing around 20 queries per month from customers being fooled by the scam. Clearly, the scam is circulating even more and conning an increasing number of Brits.”

“This figure, of course, only includes the victims who have got in touch with us. The chances are there are many, many more victims out there.”

“The increase in scam reports seems to coincide with the emergence of the cost of living crisis, so we suspect that the scammers have sensed an opportunity to scale up their efforts at a time when a far greater number of people may be feeling the pinch and needing quick access to credit.”

How does the scam work?

Alex Kosuth-Phillips detailed the method behind the scam:

“This type of scam is known as ‘cloning’. The scammers will pick out a legitimate, Financial Conduct Authority (FCA) authorised and regulated loan provider or credit broker and pretend to be a representative from that company.”

“They then get in touch with a large pool of people either via cold calling, emailing or SMS messages and indicate to these people that they have been approved for a loan. The APR the person is offered is typically a lot less than advertised by the legitimate company to make the offer “too good to turn down”. The list of contacts may have been purchased from data sellers or the scammers may use other tactics such as trial and error phone number calling or email address generation.”

“They will often use the name of a legitimate loan company and possibly even direct customers to the legitimate website to try and convince the target that they are indeed a representative of the cloned firm.”

“The scammers will then state that, in order for them to transfer the loan funds into their bank account, the victim must pay either the first instalment of the loan upfront (which could run into the hundreds of pounds) or pay a release fee.”

“A newer tactic is where the representative asks if the customer has a guarantor; if they do not, they will ask for a “guarantee” fee which ranges from £25 to £150.”

“Of course, the loan funds never materialise and the victim ends up out of pocket”.

“We have even received reports of scammers requesting that the victim send Amazon vouchers to a specified Amazon account or send money via PayPoint or Western Union money transfer.”

Little-Loans have created a guide to help not only their customers, but anyone who may want to educate themesleves on how to spot all types of scams – https://www.little-loans.com/how-to-spot-loans-scams-fake-sites  

What should I do if I have been scammed?

Alex suggests that if you are unsure about any communications received from a lender or credit broker, the best thing to do is to get in touch via their official website.

“Sometimes victims will contact us to verify that the offer is legitimate, which is great as we can then immediately let them know it is a scam and that they should not continue their contact with the supposed representative.”

However, sadly it’s often too late once the money has left the victim’s account.

“We will have victims get in touch with us asking where their funds are, at which point it is probably too late and their money has already been transferred to the scammer and there is nothing they, or we, can do about it – short of reporting the scam to the FCA and ActionFraud. If you have paid a fee, you can visit https://www.citizensadvice.org.uk/consumer/scams/check-if-you-can-get-your-money-back-after-a-scam/ to see what your options may be and what routes you can take to try and get your money back. “

“We would like to increase awareness of this scam to minimise the number of people that fall foul of these tactics and end up out of pocket – sometimes significantly so.”

The FCA has a helpline where consumers can speak to someone about a potential clone or to find out what they can do if they have been the victim of a cloning scam. You can find more details here.

They also issue notices of all cloning scams they are aware of on their news page; you can search for the company you have been approached by and check if there are any known scams in circulation.”

What should I look out for?

“The key thing to remember is that any legitimate loan company would never ask the customer to pay any money upfront to release the loan funds. You should never pay upfront fees for a loan or send money in return for a loan. If in doubt about the legitimacy of any loan provider or broker, you can check their credentials on the financial services register at register.fca.org.uk.”

Little-Loans.com is a Financial Conduct Authority authorised and regulated credit broker, specialising in same-day loans and short-term loans.