Be aware: Loan scam reports on the rise

The rising number of loan scam complaints in Australia has reportedly increased between 2022 and 2023, prompting authorities to do all necessary measures to combat fraudulent activities. However, economic fluctuations have created an environment prone to these financial scams especially nowadays wherein the majority of consumers are seeking more financial assistance because of the continuous price hikes of basic commodities.

During these financially-challenging times, being informed can be a consumer’s best shield against falling victim from these predators. Scammers have been more and more creative over the years, so it is important to stay vigilant. While there are new scams being discovered, some of the most common are as follows:

• Advance-Fee Scams: Scammers promise low-cost loans but need upfront fees. Be wary since trustworthy lenders usually do not want upfront deposits.
• Phishing scams: Con artists deceive people into divulging personal or financial information by sending false emails or texts. Never divulge critical information without first making sure the loan is legitimate.
• False Lending Websites: Con artists fabricate websites that look and feel like those of real lenders. Before completing any transactions, confirm the legitimacy of the website and double-check the information. There are a lot of trustworthy resources that can be used such as well-known comparison websites like Finder AU and Friendly Finance. Always make sure to do your due diligence before applying for any loan online.

Scams have cost Australians an astounding $3.1 billion in 2022, which illustrates how serious the problem is. The urgent need for a unified front against fraudsters in the nation is emphasised in the Targeting Scams report.

Additionally, Australians lost approximately $6.2 million to online shopping scams alone between January and September 2023, demonstrating the pervasiveness and success of frauds in the digital sphere. Fraud specialists at NAB have identified several fraud tendencies that are expected to affect Australians in 2024. Although not specifically related to lending, this illustrates how scams are changing and how careful one must be.

How loan scams operate

In Australia, loan scammers take advantage of those looking for financial help by using fraudulent techniques. A summary is provided below:

• First Contact: Scammers frequently approach people who are looking for loans by sending unwanted emails, calling, or posting adverts online.
• False Promises: They play on people’s financial weaknesses by offering alluring guarantees of fast approval and affordable interest rates.
• Upfront fees: Since real lenders often deduct fees from the loan amount, it is a red signal when scammers request upfront payments under the guise of administrative charges or security deposits.
• Fake paperwork: To give victims a false sense of validity, fake loan approval paperwork is given to them.
• Ghost Lenders: To provide the impression of credibility, con artists impersonate lenders who don’t exist or use the names of respectable organisations.

There can be different signs that you are being targeted as a possible loan scam victim. Knowing these can help consumers avoid this financial pitfall.

• Guaranteed Approval: Scammers who make such claims frequently take advantage of those who are desperate. Creditworthiness is evaluated by reputable lenders.
• Upfront Fees: It is suspicious when fees are requested before loan distribution. Reputable lenders take costs out of the loan balance.
• High-Pressure Techniques: Con artists take advantage of the need for quick judgements. Reputable lenders give consumers time to evaluate the agreements.
• Unregistered Lenders: Check the registration of the lender, as con artists frequently work without one. Legitimate lenders follow all rules and regulations.
• Offers That Seem Too Good to Be True: Exceptionally low-interest rates and other unrealistic claims are common signs of scammers. Reputable lenders follow industry norms.

Always verify the legitimacy of lenders

• Check Licencing: Make sure the lender is properly licenced. For verification of their legality, see official government websites.
• Research Registration: Make sure the lender is registered, especially with respectable organisations such as the Australian Securities and Investments Commission.
• Avoid Unrealistic Offers: Offers that look too good to be true should be avoided. Unbelievably low-interest rates might be a sign of fraud.
• Review Terms and Conditions: Give the loan conditions a close examination. Reasonable and straightforward conditions are offered by reputable lenders.

Payday loans, personal loans, and home loans are the most common lending options readily available for consumers, which is why this is also the most susceptible to scams. If you suspect a loan scam, do the following:

• Stop Communication: If you think someone is scamming you, stop talking to them right away. Don’t provide any personal information.
• Document Details: Hold onto any correspondence, records, or information about the alleged fraud in case it is looked into further.
• Report to Authorities: File a report on the fraud with the appropriate authorities, such as the local police, ASIC, or ACCC.

The financial security of Australians is being threatened by the increase in loan fraud. Australian banks have joined together to create the Scam-Safe Accord, which highlights the need to stop and address these fraudulent operations. To protect their funds, people should follow best practices, be alert to loan fraud, and confirm the authenticity of loan proposals. To effectively combat fraudulent activity, financial professionals, consumer protection groups, and law enforcement stress the importance of industry responsibility and timely reporting.

Readers are advised to stay informed about scam trends and share this information with friends and family to protect their financial well-being. By being proactive and sharing knowledge, a resilient community can be created, less susceptible to loan scams, enabling individuals to navigate the financial landscape confidently.