The Office of Fair Trading is warning people to stay clear of scam loan companies which take upfront fees but fail to provide credit.
It says there has been a 50 per cent year-on-year rise in complaints about loan scams, particularly credit applications which involve the consumer wiring or sending upfront fees through money transfer companies.
Complaints to the OFT-managed advice service Consumer Direct increased from 2,059 between July, 1, 2009 and June, 30, 2010 to 3,167 during the same period in 2010-11.
The OFT is warning people to be cautious when dealing with firms which ask for upfront fees or when a firm cold calls offering credit. It also says consumers should check to see if the firm has a consumer credit licence and to research the business.
It also advises consumers should not give out card details and should not wire money to loan companies using money transfer services.
Consumer Credit Group director David Fisher says: “We have seen an increase in complaints about companies who are not interested in the applicant’s credit history, that ask for payment of fees upfront and then disappear with the money.
“We advise people to check out the company carefully before agreeing to anything, including asking for a landline number, a physical address and doing a search about the company online, as well as checking that they have a valid credit licence.”