Complaints about loan fee scammers flood OFT
More than 3,000 complaints about businesses that have disappeared with thousands of pounds paid upfront for loans that were never arranged have flooded the Office of Fair Trading over the past 12 months.
In 2009/2010 there were 2,059 complaints made to advice service Consumer Direct but this has risen sharply to 3,167 in the 12 months to the end of June 2011.
The regulator says it is looking to improve regulations in the area and warned consumers to never pay a fee for a loan up front; something which 270,000 people are thought to have done over the previous 12 months alone.
Problems arise when borrowers are asked to pay a fee before any credit checks are made. The credit broker then simply disappears with the money without ever arranging the loan - leaving consumers out of pocket.
"Anyone looking to take out a loan should do a bit of research before deciding which company and loan broker to use. Simple steps such as asking for a landline number and confirming that the company arranging the loan has a legitimate address can save a lot of financial heartache later on," said Bryan Nott of Simpson Millar LLP. "The same goes for checking with the OFT that the business has in fact got a valid credit licence."
The OFT said it would seek to change regulations to give borrowers a chance to claim back fees for loans that were never made. It has also promised to ask the Government to ban upfront fees for arranging loans altogether.