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The FCA Warns of Loan Fee Fraud Risks as 24% of UK Consumers Turn to Loans to Cover Summer Spending

Around 55 per cent of UK adults are more worried about their finances this summer than they were last year; with 24 per cent turning to credit or loans to fund summer-related spending; the Financial Conduct Authority (FCA) has revealed as part of a new campaign to help consumers spot and avoid loan fee fraud.

With increasing numbers of consumers turning to loans to facilitate summer spending; the FCA has warned that more people could be susceptible to loan fee fraud.

Loan fee fraud, where a consumer pays a fee for a loan they never receive, typically results in a £260 loss on average. The FCA revealed that this type of fraud peaks in the summer months and has been growing year on year.

If a consumer deals with an unauthorised firm, they will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong. With this in mind, the FCA is aiming to increase awareness of the scams and keep consumers safe.

Last summer, the FCA saw a 26 per cent increase in complaints from consumers who had fallen victim to loan fee fraud when compared to 2021. In 2023, with further increases in the cost of living, could see an even more increased risk of loan fee fraud.

Rising food (63 per cent) and energy costs (53 per cent) were cited as the biggest concerns across the FCA’s survey of consumers in the UK. These issues appear to be compounded by summer-related spending as entertainment costs (24 per cent), and summer holidays (22 per cent) emerged as the next most prominent financial worries.

While 46 per cent of UK adults have gone or plan to escape this year on a summer holiday, around 35 per cent are worried about how they are going to pay for it.

Fraudsters circle during the summer season

With the pressures of the summer worrying consumers, many are dipping into their savings (18 per cent), or turning to credit cards (12 per cent). Overall, 24 per cent of consumers are turning to credit or loans to fund additional summer-related spending.

Financial conduct authority (FCA)As a result, loan fee fraudsters could use this as an opportunity to steal money from unsuspecting consumers.

Meanwhile, the summer months can be an especially difficult time financially for parents. Seventy per cent of respondents with children under 18 said they are worried about their personal finances this summer. Among those going away, parents of children under 18 were noticeably more worried about funding holidays (56 per cent compared to 35 per cent across all households).

When the FCA asked parents how they plan to fund spending, 21 per cent responded they either have already, or plan to, take out a loan to cover costs.

Having children at home for the summer (32 per cent), funding activities for children (24 per cent) and back-to-school costs (24 per cent) emerged as the other largest concerns for parents in the UK this summer.

Cost of living “provides the perfect opportunity” for fraudsters
Steve Smart, FCA
Steve Smart, executive director of enforcement and market oversight at the FCA

Steve Smart, executive director of enforcement and market oversight at the FCA, explained the significance of the warning: “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. Follow our three-step check for loan fraud for how to spot the signs of loan fee fraud, and if you need to apply for a loan, check the FCA Register to see if the firm is legitimate. Don’t get burned by scams on your summer holidays.”

The FCA’s three-step check aims to help consumers protect themselves from scams:

  1. If you are cold-called or emailed, it could be a scam
  2. If you’re asked to pay an upfront fee, it could be a scam
  3. If you’re asked to pay quickly or unusually, it could be a scam


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