Criminals are constantly inventing new scams to try and reap where they don’t sow. These criminals are always a step ahead. When authorities think they have figured out the mischief the scammers are upto, they quickly invent a new trick.

One of the most recent scams targeting vulnerable citizens of Europe is the loan fee scam. Let’s quickly look at what this scam is about, how to spot and avoid it.

What is a loan fee scam?

Loan fee scams are schemes that attempt to trick unsuspecting people into paying upfront fees when they’re applying for a loan. But unfortunately the loan does not exist, so the scammers disappear with the so-called fees. It operates like this: scam artists send potential borrowers an offer of a loan with attractive interest rates and repayment plans. However, strangely, in order to “qualify” for the loan, you have to pay (often exorbitant) fees ahead of receiving it.

They essentially take advantage of people who are in desperate monetary situations. They offer “easy and hassle-free loans” while asking for an upfront payment, commonly referred to as a “processing fee.” This fee is often disguised as something else, such as “refinancing costs” or “points”. Through these tactics, scammers make money without actually providing any loan. Those in need of financial assistance may find themselves even deeper in debt after signing up for a loan that was never provided to them. This type of scam relies on unsuspecting victims looking for quick and easy money not familiar with the terms that actually come with taking out a loan.

The loan fee scams tend to increase when a majority of people are facing financial pressure, especially during the festive period when there are so many expectations from family and friends.

Already, Australia’s Financial Conduct Authority is sounding an alarm over this scam, advising citizens to be vigilant and avoid falling prey to scammers purporting to offer loans.

Figures from FCA reveal that 40% of people who normally celebrate the festive season feel pressured by friends and family to uphold the same level of Christmas spending, year after year. Of these, a hefty 33% are often concerned about their ability to pay for it especially when there is a clear rising cost of living as is normally the case from time to time. More than 12% opt to take out a loan during such times in order to bear the cost of the festivities, which leaves them exposed to loan fee scams.

Knowing that the targets are under pressure, the criminals give a limited timeline within which they need to make a decision or else they’ll not get the loan. Most victims report losses ranging from £25 and £450, being fees for a non-existent loan. This is specifically the case for Australia. The amounts can vary from country to country.

If you are a victim of loan fee scams, then it’s good that you make a point to report to your country’s authorities. Feel free as well to share your experience with Scam Help. This will greatly contribute to efforts to stop the scammers. Check out the warning signs of loan fee scams, according to Australia’s Financial Conduct Authority.