Warnings over faux lenders have almost doubled during lockdown as credit scam fraudsters target people who are struggling financially due to coronavirus.
The number of warnings published by the City watchdog related to so-called “subprime lending” and debt management scams has increased by 85pc over the last three months, according to analysis of Financial Conduct Authority alerts by accountants BDO.
There were 24 warnings published on the regulator’s website relating to unregulated firms and suspected scammers between March and June, up from 13 recorded at the same time last year, as unscrupulous con artists attempted to capitalise on heightened financial anxiety.
Schemes of this kind sometimes impersonate or “clone” credit providers and tend to target low-income borrowers or individuals with poor credit ratings who would not typically qualify for lower interest-rate loans from better known high-street lenders. Others pose as debt management firms.
There are fears that unwitting consumers who may be struggling financially – having lost their job, suffered a drop in income or placed on furlough – could be easily sucked in.
More than four million people have asked for a break from paying back their existing debts since coronavirus began, with £6bn worth of debt repayments currently on hold.
A record high of more than three million people have claimed Universal Credit since the start of the pandemic and more than 12 million workers are receiving help from the state to maintain their incomes via furlough or self-employed handouts.
Some lenders are restricting what people can borrow as the economic situation worsens, including making it harder to get a mortgage.
Richard Barnwell of BDO said this would push those struggling to make ends meet towards lesser known lenders in search of help, creating the perfect environment for unscrupulous scammers.
“With the number of scams rising significantly during lockdown, it would suggest that opportunistic fraudsters are using the coronavirus crisis as a chance to target this part of the consumer finance market,” he said.
“This is going to be an exceedingly difficult time for many consumers as their income levels may be significantly reduced. Unfortunately, technology makes it extremely easy for fraudsters to set up websites and call centres which, to the casual observer, appear to be legitimate. It’s easy to see how consumers might be duped.”
The regulator advises all consumers to cross-reference the details of any financial firm with those listed online on its “approved firms” to ensure the company is a legitimate lender or debt management business.