People in debt conned out of cash in fake loan scam, says Citizens Advice Bureau
|Published: 20th June 2010 00:02|
National charity Citizens Advice is warning people to beware of companies offering fake loans for a fee. The companies often prey on people who are already in debt and desperate for a way out.
Speaking at the Trading Standards Institute's national (UK) annual conference in Edinburgh today on the potential impact of cuts in public expenditure on consumers, Citizens Advice Director of Policy Teresa Perchard highlighted growing evidence of CAB clients losing substantial sums of money to bogus loan companies.
She said recessionary pressures are leaving the way wide open for such scams, and cutbacks in public services could allow rogue traders to flourish.
The fake loans are advertised on the internet or sometimes offered in a cold call or text. The sales pitch lures victims in with the promise of quick and easy cash on favourable terms.
They are persuaded to pay money up front as a set-up fee - sums reported by Citizens Advice Bureau clients range from £35 to £2,000 - and often asked to hand over their bank account details too. The loan they have been promised then fails to materialise, the loan company often cannot be contacted, and the money already paid is usually lost for good.
The targets are people in debt or with poor credit histories who may find it hard to borrow money from mainstream lenders.
Cases reported recently by Citizens Advice Bureaux include:
- A woman in debt after losing her job who fell victim to a scam newspaper ad offering her a loan to clear her debts. She was led to believe that once she paid an initial fee she would get a £7,000 loan, but she was then asked for two additional payments, and every time she enquired about her loan she was asked for more money. The loan has not been forthcoming and the loan company just keep asking her for more money before they will release the agreed loan amount. She is already on a reduced income, and has got into more debt to try to get the loan to help her manage the debts she already had and was struggling to pay. The bureau remarks that she is now even more stressed as her existing debts are now increasing.
- A man serving in the armed forces with debts of around £24,000 who has also just had his family home repossessed and is liable for tens of thousands of pounds in negative equity on the property. In a vulnerable moment, he responded to an unsolicited text offer of a loan . He then realised that something did not feel right so cancelled the loan and requested a refund of the original loan charge of £60 but is still waiting for this to be refunded despite numerous calls to a premium-rate number. After the loan application, he also received a text from a company offering to write off his debts for a one-off fee of £2,000. He paid £190 for the initial paperwork and then cancelled and is still waiting for his refund. He told the bureau adviser he considered himself able to spot scams and deeply resents having been caught in a moment of weakness. He is also now mistrustful of his bank as although there is no proof, he finds it odd that he was only contacted by these companies after applying for a loan from his bank.
- A man with debts and a compromised credit record who had been refused a loan was e-mailed by a company offering him an immediate guaranteed loan of £20,000 at 10.9%APR. When he phoned them to take up their offer he was asked to pay £70 upfront. He paid this on a card and was told that the money would be in his bank account within 3 days, and paperwork would be sent. None of this has happened and client feels that he may have been scammed, compounding his debt problems.
Teresa Perchard said: "In the recession loans can be hard to get and people falling into debt or unable to get mainstream credit are being targeted with ads and direct contacts offering loans that really are too good to be true. We are seeing people who have lost hundreds of pounds they can ill afford after paying fees in advance for a non-existent loan. Some have also had their bank accounts raided after handing over their account details.
"We also fear that the public sector cuts to come could result in cut backs in the vital local advice and regulatory services such as trading standards services which people turn to for help in these situations. Rogue traders and rip offs like this which thrive in recessionary times could be off the hook if this happens.
"Our advice is that once you've parted with your money there is little chance of getting it back, so we urge people to be very wary of signing up for loans that require a payment upfront - the chances are this is a scam. You can get free, confidential independent and expert advice on credit and debt from any Citizens Advice Bureau (go to www.adviceguide.org.uk for more information and contact details). If you have already paid money up front, get advice, and report your experience to your local Trading Standards department."
Citizens Advice top tips on fake loans:
- Never pay money up front
- Never give out bank account details to cold callers
- Be very wary of cold calls offering loans, and internet sites offering quick and easy credit
- If it looks too good to be true it usually is
- If you need credit, shop around, use a trusted source and always check the paperwork
- If you've already paid money up front for a non-existent loan, inform Trading Standards @ www.tradingstandards.gov.uk . The Consumer Credit Act says that all but £5 of any brokerage fees should be refunded if no loan is taken up within 6 months.
- If you suspect a scam or fraud, report it to Action Fraud 0300 123 2040, the National Fraud Authority's reporting line.
- Get free, confidential, independent debt advice from any Citizens Advice Bureau (go to www.adviceguide.org.uk for more information and contact details).