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Loan fraud: 8 steps to determine if a bank is legitimate

Loan fraud: 8 steps to determine if a bank is legitimate
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Unfortunately, loan fraud is a fast-growing industry for a certain breed of criminal. However, with a little know-how, you can avoid joining the ranks of loan fraud victims.

What is loan fraud?

Loan fraud is an umbrella term for a range of scams. Advance fee fraud, loan repayment fraud, loans taken out by identity thieves, and loan offers from scammers are all types of loan fraud. You can learn more about them here.

The one thing the different types of loan fraud have in common is that they’re not carried out by legitimate, registered and well-run companies. Therefore, if you check that your bank or lender is legitimate before applying for a loan, you should be able to avoid becoming a loan fraud victim.

How can you determine if a bank is legitimate?

1. Look at the Financial Conduct Authority (FCA) Register

The FCA regulates financial firms to ensure consumers get a fair deal. Search for a bank’s name on FCA’s Financial Services Register, and you’ll see whether the bank’s registered, what business it’s allowed to carry out, and its official contact details.

2. Contact details

Do their contact details match the FCA register and the official website, can you contact them, and do they answer?

A scammer who’s impersonating a legitimate company won’t use the real company’s registered contact details. Check the Financial Services Register and the company’s official website to see if the details match.

FCA-regulated firms ensure that “consumers do not face unreasonable post-sale barriers imposed by firms to…submit a claim or make a complaint.” This means legitimate firms are easy to contact, respond to messages and try to solve customer problems promptly. Does that sound like the company you’re dealing with?

3. Physical address

If a company’s only got a PO box, it’s easy for them to disappear without a trace. When you’ve found them on the FCA register, use something like Google Maps to check that their registered physical address exists.

While not all companies have a physical address, a legitimate bank probably won’t operate out of a vacant building or a children’s playground.

4. Check their website and marketing

Ask yourself if they’re behaving like a reputable business. Legitimate banks don’t use mass email, unsolicited phone calls or door-to-door sales to solicit new customers. If you’re interested in an offer, search for the official website or check the FCA register and use those contact details to seek more information. Most importantly, don’t use the link in the email or message.

It’s not a hard-and-fast rule, but reputable companies’ websites are secure (click on the locked padlock in your browser address bar for details), and their writing isn’t full of spelling, grammar and capitalisation mistakes.

5. Check their reviews

Search online for the company’s name and reviews. Fraudulent companies often have either all negative reviews, or no reviews at all. Watch out for reviews that mention no response to messages, no support for complaints, and no payments – they could indicate loan fraud victims.

6. Up-front fees

Loan fee fraud is the most common form of loan fraud. Legitimate banks are transparent about their fees. When they charge an up-front fee or a loan, they’ll provide a notice that includes:

  • the name of the firm on the Financial Services Register;
  • a statement that the firm is acting as a credit broker;
  • details of the fees, including amounts, calculation methods and payment methods; and
  • a notice for you to sign acknowledging that you understand.

They will never ask you to pay by an unusual method like Western Union or iTunes gift cards, and the fee will not be refundable. Scammers may explain fees away as deposits, insurance, or administrative fees; they won’t provide the detailed information required for legitimate banks.

7. Paperwork and credit history

In the UK, legitimate banks will confirm your identity and address, check your credit score, and verify your income before offering you a loan. Any organisation that offers guaranteed approval regardless of income and credit history is a scammer.

8. Find out the going interest rate

When you’re looking for a loan, do your research and find out the going interest rate for similar loans in your area. If a firm offers you a loan at a significantly lower rate than everyone else, find out. While there might be an excellent reason, and it could be a legitimate company, it’s worth questioning.

Don’t be a victim

If it sounds too good to be true, it probably is. Above all, do your research, listen to your gut, and avoid becoming a loan fraud victim.

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