The Financial Conduct Authority (FCA) has warned that UK households feeling financial strain in the lead up to Christmas could be more vulnerable to loan fee fraud.

Around half of UK adults (47%) are feeling pressured to spend above their means during Christmas to provide for family, a figure that rises to 64% for those with children under 18, according to consumer research from the FCA.

The regulator also revealed that two fifths (40%) of UK adults are concerned about being able to afford Christmas spending this year. For those with children under 18, this figure rises to 52%.

The FCA’s research was based on a study among 2,000 UK adults in November, and revealed that 29% of parents have borrowed money, or intend to borrow for Christmas this year, while the amount borrowed has increased by more than a third, from £305 last year to £412 this year.

With financial pressure building and more people looking to borrow, the FCA expressed concern that stretched households could be vulnerable to loan fee fraud. This type of fraud – where a consumer pays a fee for a loan they never receive – typically results, on average, in a £255 loss.

“Fraudsters will take advantage even of parents’ desire to give their children a good Christmas,” executive director of enforcement and market oversight, Therese Chambers. “Don’t let them. Remember the three-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.”

This year the FCA has also partnered with Debt Free Advice, a debt advice coalition, to promote the support they provide individuals experiencing financial stress and challenges with debt during this time of year.

According to Debt Free Advice, new debt assessments between December 2022 to March 2023 were 83% higher compared to April to July 2023.

“As Christmas approaches, families across the country face mounting pressure to keep up with societal expectations, often leading to increased debt and financial strain,” managing director of Debt Free Advice, Matt Dronfield.

“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.”

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