Cost of Living: Troubled families become the target of quick loan scams

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Desperate families are being tricked into losing money in a quick loan scam that has increased thanks to the cost-of-living crisis. And cases of fraud have soared that Lloyds Bank has warned its customers to beware of the scammers.

And the Financial Regulator has also warned people to beware of out-of-the-blue text, email or phone loan offers that offer access to quick cash. The scam works like this:

  • Scammers post online ads for fake companies or pose as real companies offering quick loans;
  • Troubled households are tempted by these ads as they offer a short-term solution to liquidity problems;
  • The fake loan is “approved” by the scammers;
  • The victim is then asked to send cash via bank transfer to reserve the credit;
  • The victim never gets the loan, and once the money is received, the scammers disappear.

Read more: HMRC issues fraud alert to 2.1m Tax Credits customers

The scammers can ask for more money until the victim becomes suspicious – and the number of people falling for the trick is up 90 per cent so far this year compared to the first five months of 2021, with Lloyds saying the average victim Loses 231 pounds.

The reason for the prepayment may vary. Some of the most common reasons scammers give are a verification fee, a processing fee, or a guarantee fee, and as always when it comes to scams, criminals know how to appear legit.

Liz Ziegler, head of retail fraud and financial crime at Lloyds Bank, said: “Organized crime gangs will ruthlessly exploit any change in consumer behavior. With the cost of living rising, scammers are increasingly turning to advance fee fraud.

“They know that some people need more support with their money and the victims in these cases often have bad credit or may already be in financial difficulties. It’s important to remember that a real lending company will never ask for an upfront payment before releasing the funds.”

Between April 2020 and March 2021, Action Fraud received 91,593 reports of application fraud, including advance payment schemes.

In total, £2.35 billion was lost to fraud in 2021, according to Action Fraud.

Have you fallen for a scam? Join the conversation below

What should you do if you think you’ve been scammed?

  • If you have responded to a scam, immediately cut off all contact and do not engage in further communication with the caller
  • Call your bank directly and cancel any recurring payments — or most people can call a new hotline set up to report fraud 159
  • Report the scam to the police via Action Fraud on 0300 123 2040 or report anonymously via the Action Fraud website.
  • If you need further assistance, contact Citizens Advice Scams Action via the Citizens Advice websiteor call the Scams Action hotline on 0808 250 5050.

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