Steer clear of potential loan scams warns OFT

The OFT is alerting consumers after seeing a 50 per cent year-on-year rise in complaints about loan scams, particularly credit applications which involve the consumer 'wiring' or sending upfront fees through money transfer companies.

Complaints to OFT-managed advice service Consumer Direct increased from 2,059 between 1 July 2009 and 30 June 2010 to 3,167 during the same period in 2010-11.

The OFT advises people to be vigilant when dealing with or taking calls from loan companies that want upfront fees and who are not interested in consumers' credit history.

The OFT's 'dos and don'ts' to help consumers spot scam loan companies are:

Dos:

- Do be very careful when dealing with loan companies that charge upfront fees

- Do be cautious if a loan company cold-calls you

- Do some research about the business offering the loan - look for proper phone numbers and physical addresses and ask for information in writing

- Do check that the company has a credit licence on the Consumer Credit Register

Don'ts:

- Don't believe adverts which indicate a loan is 'guaranteed'

- Don't give out your card details 'for security reasons' as the company may then debit your bank account without you knowing

- Don't wire money to loan companies using money transfer services when applying for loans

- Don't go ahead with a loan if a company approves it and then demands a fee before you get the money.

David Fisher, OFT Director of the Consumer Credit Group said:

"We have seen an increase in complaints about companies who are not interested in the applicant's credit history, that ask for payment of fees upfront and then disappear with the money.

"We advise people to check out the company carefully before agreeing to anything, including asking for a landline number, a physical address and doing a search about the company online, as well as checking that they have a valid credit licence.'

"If consumers think they have been approached or tricked by an advance-fee loan scam, they should report it to Consumer Direct."