The Financial Conduction Authority (FCA) is warning consumers to watch out for signs of loan fee fraud as summer spending fuels financial pressure.
FCA research shows over half of UK adults (55%) are more worried about their finances this summer than they were last year with a quarter of all consumers surveyed (24%) turning to credit or loans to fund additional summer related spending, consumers may be more susceptible to being targeted by loan fee fraudsters.
Parents in particular are feeling the pinch, with 21% either taking out or considering a loan this summer. Loan fee fraud is where a consumer pays a fee for a loan they never receive – typically results in a £260 loss. This type of fraud usually peaks in the summer months is growing year on year. The FCA’s data shows that last summer, there was a 26% increase in complaints from consumers who had fallen victim to loan fee fraud compared to 2021. This year, the rising cost-of-living coupled with summer spending pressures could increase the risk of loan fee fraud.
The cost-of-living pressures loom large. Rising food (63%) and energy costs (53%) were cited as the biggest concerns. However, summer related spending is compounding this, with entertainment costs (24%), and summer holidays (22%) being the next most prominent financial worries. And while 46% of UK adults have gone or plan to go away this year on a summer holiday, more than a third (35%) are worried about how they are going to pay for it.
This is driving many to fund summer spending either through savings or credit. According to the research, 18% of consumers will use savings to fund summer spending, and 12% are turning to credit cards. With 24% of consumers are turning to credit or loans to fund additional summer related spending, loan fee fraudsters could use this as an opportunity to steal money from consumers.
The summer months can prove even more of a financial burden for parents. 70% of respondents with children under 18 said they are worried about their personal finances this summer. And, among those going away, parents of children under 18 were noticeably more worried about funding holidays (56% compared to 35% across all households).
When asked how they plan to fund their spending, 21% responded that they either had already, or were planning to, take out a loan to cover cost. Other areas of concern for parents included the costs associated of having children at home for the summer (32%), funding summer related activities for children (24%) and back to school costs (24%).
Steve Smart, Executive Director of Enforcement and Market Oversight, said “For many, summer brings with it the chance to relax and unwind but it also brings with it financial pressures – from holidays and festivals to funding days out, or out of term childcare for parents. With inflation, energy costs, and rising mortgage bills, this summer spending will come at a time of enhanced vulnerability for many.”
“For fraudsters, this provides the perfect opportunity to take advantage of people considering how to make ends meet over the summer months.”