Financial watchdog warns of loan scams as Christmas costs push 53% of parents in Wales over budget
With Christmas on the horizon, the Financial Conduct Authority (FCA) has launched a campaign against loan fee fraud, targeting the rising financial stress among UK families.
The FCA’s latest research reveals a worrying trend of overspending during the festive season, particularly among parents with young children.
The FCA’s findings show that almost half of UK adults (47%) feel compelled to spend more than they can afford during Christmas, a figure that rises to a staggering 64% for parents with children under 18.
In Wales, the situation is particularly acute, with 53% of adults feeling pressured to overspend and 38% worried about meeting their Christmas expenses.
This financial burden is leading more parents to borrow money.
Over a quarter (29%) of parents are taking on debt for Christmas expenses, with the average amount borrowed rising significantly from £305 last year to £412 this year.
This increased borrowing comes with risks, primarily the threat of loan fee fraud, where consumers are tricked into paying a fee for a loan they never receive. The FCA reports that victims of such scams lose an average of £255.
To counter this, the FCA recommends a 3-step loan fraud checklist for consumers:
- Be cautious of cold calls or emails, as they could be scams.
- Be wary of requests for upfront fees, which could indicate a scam.
- Be suspicious of demands for fast or unusual payment methods, which could also signal a scam.
Therese Chambers , Executive Director of Enforcement and Market Oversight, said: “Fraudsters will take advantage even of parents’ desire to give their children a good Christmas. Don’t let them. Remember the 3-step check and protect yourself and your loved ones from loan fee fraud. If you are cold called or emailed, it could be a scam. If you’re asked to pay an upfront fee, it could be a scam. And if you are asked to pay quickly or unusually, it could be a scam.”
Matt Dronfield, Managing Director of Debt Free Advice, said: “As Christmas approaches, families across the country face mounting pressure to keep up with societal expectations, often leading to increased debt and financial strain.”
“Many of our clients are already burdened by the weight of utility bill debt, imposed by the ongoing cost of living crisis. Holiday-induced debt can have far-reaching consequences, affecting families’ financial stability, mental health, and overall wellbeing.”
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.