Fraudsters are attempting to steal two thirds of consumers’ average Christmas gift spend.

Some one in eight scams are 'loan fee frauds' when consumers are asked to pay an upfront fee, for a loan or credit that they never then receive.

The Financial Conduct Authority (FCA) has issued a ‘Three Wise Warnings’ to protect people from loan scammers this festive season.

It comes as loan fee fraud was the third most reported scam last December according to the FCA.

There are thousands of different types of scams involving a wide range of services like investment, pensions and online trading, but the most common is a phone call offering something so tempting that the unwary ‘mark’ or victim falls for it hook, line and sinker.

This involves people asking for a consumer to hand over an upfront fee – usually between £25 and £450 – when applying for a loan or credit that they will never get. 

Their research shows people spend an average of £355 on Christmas presents.

But with the average loan fee fraud scam costing consumers £220 each, they could lose nearly two thirds (62%) of what would have been under their tree.

What’s more, this Christmas, 25% of people plan to spend more than ‘normal’ years – rising to a third (34%) among those who have faced financial hardship as a result of the pandemic, such as being furloughed or a loss of income, meaning the hit could be even harder.

The FCA warning asks people to question if they are being asked to pay a fee upfront, whether they are being pressured to pay quickly, and whether they are being required to pay by any unusual method.

Two thirds (66%) of people feel confident they could spot a loan scam if approached by a scammer, but more than 1 in 4 people (28%) would consider paying a fee first to secure a loan - one of the main warning signs of loan fee fraud, say the FCA.

This rises to 54% for 25-34 year olds, who are most likely to be hit by this type of fraud.

The FCA is warning the financial impacts of the Covid-19 pandemic may also make the amount lost to loan fee fraud even higher this December.

The study shows 60% of people who have experienced a job loss, furlough or workload or pay cut due to the pandemic will to getting into debt to pay for their additional festive spend, meaning they could be more susceptible to loan fraud.

Nearly two-thirds (65%) of people who have faced financial hardship due to Covid-19 say falling for a scam at Christmas would be worse than any other time of year, and 64% say being a scam victim in 2020 would be worse than any other year.

Mark Steward, executive director of enforcement and market oversight for the FCA, said: “This December will be different to previous years in lots of ways, and we know many people will enter the festive season and end the year having been negatively financially impacted by the pandemic.

“Unfortunately, fraudsters will seek out every opportunity to exploit vulnerable people. Loan fee fraud is an issue that shouldn’t be overlooked. At the end of a tough year, anyone seeking a loan for any reason, needs to watch out for thered flags, and look to spot the warning signs.

“It’s always best to check with the FCA’s register to make sure you are dealing with an authorised firm, before taking out a loan. Don’t give scammers what they ask for this Christmas!”

Gareth Shaw, head of money with consumer organisation Which?, said: “The coronavirus crisis has created the perfect environment for fraudsters, with scammers using callous and sophisticated tactics to exploit people’s financial vulnerabilities, particularly in the run up to Christmas.

“We’d advise consumers to be very cautious before taking out a loan, especially as fraudsters look to take advantage of the current uncertainty by any means possible. Make sure you do your research on the lender and steer clear if it demands an upfront fee or is not registered with the financial regulator.”