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Consumer Rights.

Updated: 4 Mar 2021

Advance loan fee fraud and scams

Don't give scammers an up front advance fee for a loan you'll never receive. Use our tips to identify advance fee scams and avoid loan fee fraud.
Which?Editorial team

What is loan fee fraud?

Loan fee scams happen when you’re asked to pay an upfront fee for a loan you’ll never receive.

Advance fee fraud for a loan is now the most common type of scam reported to the Financial Conduct Authority (FCA), ahead of investment fraud.

How does loan fee fraud work?

If you’ve got limited access to mainstream credit, have a lower income or a lower credit rate, then you’re more likely to be targeted by loan fee scammers.

Fraudsters will try to convince you that you can pay an advance fee for a loan, which you’ll never receive.

Some people are persuaded to make several payments before they realise it is an advance fee scam.

How to spot a loan fee scam

If you are asked to pay an upfront fee for a loan it could be an advance fee scam. Here are some of  the common signs of an advance fee loan scam:

  • being asked to pay an upfront advance fee
  • likely being told that the fee is refundable and will be used as a deposit, administrative fee, or as insurance because of bad credit history
  • asked to pay various follow-up fees in order to get the loan, ranging from £25 to £450 each time
  • you’ll be put under pressure to pay quickly and/or asked to pay in an unusual method (eg Western Union, iTunes vouchers).

Before you take out a loan, check the firm is authorised by the FCA. You can do this by checking the Financial Services Register to make sure the contact details provided by the firm match the details the register.

Always use the contact details on the FCA register rather than a direct line or email given to you by the loan firm.

If there are no contact details on the FCA register or the firm claims they are out of date, call the Consumer Helpline on 0800 111 6768.

If you take out a loan with an unauthorised firm, you won’t be covered by the Financial Ombudsman Service if things go wrong.

Report a loan fee scam

If you think you’ve been approached by an unauthorised firm or a scammer is trying to con you into sending an advance fee for a loan, report it to the FCA via its reporting form or Consumer Helpline on 0800 111 6768.