You have to be careful about which lender to work with. No matter if it is for a house, personal, or refinancing your auto loan, you need to do due diligence to make sure you are working with a legitimate company. If you get carried away, it is easy to fall for scams.
Lender Regulation in the UK
Mortgages and consumer lending are regulated in the U.K. That means a lending company needs to be authorized by the United Kingdom Financial Conduct Authority to do these services unless exemptions apply.
There is a range of regulatory requirements that cover:
- How the loans are marketed and sold
- How the loans are administered on an ongoing basis
- What happens if a borrower falls behind on payments
A legitimate lender will abide by all these regulations. They are designed to protect borrowers from scams, so make sure to work with a registered company.
How to Spot a Scam
Checking the Website
When looking for a lending company, the first thing to do is check their websites. It is possible to spot red flags at this initial step already.
Is the website secure? The web address should start with HTTPS, not HTTP. An unsecured site is a clear sign of fraud.
Another red flag on the site is their contact details. Legitimate companies want you to get in touch with them in any way. They will give you a contact form, phone number, email address, and their office locations. A fraud website usually does not have the other details aside from a contact form.
That contact form will not be secure. Some legitimate websites may not have HTTPS on their main site but would at least have it on their contact form. That is a way to protect the information sent over the internet. If that is not present, the contact form is most likely used to steal data.
Read Online Reviews
The purpose of online reviews is to provide information from people who have tried that company or service in the past. Do not take this for granted. Reading reviews and testimonials can be a huge help in spotting scams and fraud lenders.
Do not rely on testimonials at the main site of the lending company. They would put their best foot forward and not publicly show bad reviews. If they are a scam, the reviews on their website would most likely be fake anyway.
It is best to check reviews from legitimate sites like TrustPilot and ConsumerReports.
Clear Process
A legitimate lending company will have a clear process. If you ask them about their requirements, they can provide you with a list and steps of everything you need to do. It is clear and straightforward.
If the company cannot provide you with its process, take that as another red flag.
Quick and Easy Approvals
Legitimate lenders want to protect themselves too. That is why they have a stringent process before you get approved for a loan.
They also base the offer on your background and financial status. If you have a good credit score, you will most likely get the loan amount you are after.
The red flag here is that you can get a quick approval at a high loan amount even if you have bad credit. That is the most common way scammers prey on people by targeting their desperation.
If the offer is too good to be true, it probably is a fraud.
Asking for Upfront Money
Once a lender asks for upfront money, walk away. They would tell you that the money is in good faith or for processing fees. That is not true.
They would usually combine this with a tempting offer such as a high loan amount at very low-interest rates. However, the only way to get it processed is by giving upfront cash. Again, that can sound very tempting, especially for someone desperate. But the fact is it’s all a ruse.
Is the Company Registered?
If you have doubts about a lender, you can always check with the FCR since lending companies need to be registered. If they are not, it is best to walk away immediately.
Conclusion
Financial scammers are enjoying their best success in recent years by preying on desperation. And they keep evolving their schemes.
It is up to you to stay vigilant in choosing which company to choose. Note the usual schemes and how to spot them. Do your research. More importantly, follow your gut instinct. If it feels like a fraud, cease pursuing it.
