Loan fee fraud, also called advance-fee fraud, is a scam in which someone is persuaded to pay a fee for a loan that never arrives. The FCA says it receives hundreds of reports every year, that fraudsters typically ask for between £25 and £450, and that victims report an average loss of £255. The FCA’s guidance applies UK-wide.
How the scam works
According to the FCA, scammers often target people who have applied for loans online and may contact them unexpectedly, offering the money they need. Before releasing the loan they ask for an upfront payment described as a deposit, administrative fee or insurance, and may claim it is needed because of a bad credit history. They put pressure on the victim to pay quickly by bank transfer, ask them to buy vouchers such as Google Play, Amazon or eBay, or, more recently, to pay through crypto exchanges. The fee may be described as refundable, but the FCA says that even after paying you never receive the loan or a refund.
General warning signs
The FCA’s wider scam guidance asks a series of questions: is the contact unexpected; do you feel pressured to act quickly; does the offer sound too good to be true; are they claiming special authority or trying to flatter you; are you feeling worried or excited? Answering yes to any of them, or being unsure, is a prompt to stop and check. It also advises hanging up or ignoring messages if you feel pressured, saying a genuine bank or business will not mind waiting while you think.
Check the firm before you pay
The FCA says to use the FCA Firm Checker to confirm a firm is authorised and has permission for the service offered, to check that the firm reference number and contact details match the Firm Checker, and to use the contact details listed there rather than a number or email you were given. It warns that some firms pretend to be authorised, and advises using the official web address for the Firm Checker rather than clicking links in emails or on a company’s site. If no contact details are listed, or the firm says they are out of date, the FCA says to call it on 0800 111 6768.
Practical do’s and don’ts
The FCA advises treating all unexpected calls, emails and texts with caution even if the person knows some basic information about you, and checking bank and credit card statements regularly. It says not to give out bank account or card details unless you are certain who you are dealing with, not to share passwords, and not to give anyone access to your device by downloading software or an app from a source you do not trust, because scammers may then be able to control the device and reach your bank account.
How genuine loan fees differ
Not every upfront fee is fraud, but the rules for genuine ones are specific. The FCA says that where an authorised firm asks for an upfront fee before providing a loan, it must send you a notice, and you must reply saying you understand and agree with it before you get the loan. The notice should give the firm’s name as it appears on the Firm Checker, state that it is acting as a credit broker, say whether you must pay a charge for its services, and give the amount (or how it is calculated) and when and how payment will be taken. A request for an urgent transfer or a voucher code with none of this is a red flag.
If you have been targeted or lose money
The FCA says to report suspected scams to it on 0800 111 6768 or through its contact form. If you have lost money, it says to contact Report Fraud, and adds that people who have already been scammed should be extra careful because fraudsters may target them again, for example by offering to recover the money for a fee. Recovery offers of that kind are known as recovery room scams. If you are struggling with money, the FCA points to MoneyHelper and the Debt Advice Locator for free guidance.
The FCA’s scam guidance gives Report Fraud’s telephone number as 0300 123 2040.
FAQs
Is every advance fee a scam?
No. The FCA says genuine authorised firms sometimes ask for an upfront fee, but they must send the specific notice described above and you must agree to it before the loan is provided.
Why is a voucher or crypto payment a warning sign?
The FCA says scammers have asked victims to buy vouchers and, more recently, to pay through crypto exchanges. Treat any request to pay a fee that way as a reason to stop and verify the firm.
What if the firm is on the register but the phone number is different?
The FCA says to check that contact details match the Firm Checker and to use the details listed there. Mismatched details are a warning sign, because the FCA notes that some firms pretend to be authorised.
Bottom line
The pattern is consistent: an unexpected offer, pressure to pay a fee first and a payment route that is hard to reverse. Check the lender on the FCA Firm Checker using its own listed contact details, never pay an upfront fee you did not expect and cannot verify, and report anything suspicious. This article is general information, not financial or legal advice.