Rogue websites are snaring soaring numbers of borrowers – claiming to offer cheap loans but charging victims up to 7,000% interest.
According to the Financial Ombudsmen Service, more and more people are calling its anonymous phone lines after being duped by these dodgy sites.
Many are offering borrowers rock-bottom rates in return for a modest fee – typically around £50 – but instead a middleman seizes their money and takes out a payday loan on their behalf.
These loans can charge up to 7,000% interest and missed repayments lead to extra fees.
Victims will also face the possibility of being turned down for a mortgage because the majority of banks reject payday loan borrowers.
A spokesman for the Ombudsmen said: “We have been surprised by the sheer numbers of calls we have received about these websites. It would suggest that there is a clear issue developing here which is affecting people of all walks of life.
“Some years ago we saw people losing out to similar companies which were then subsequently closed down. Now it seems as though these kind of firms are back, although many appear to be regulated.”
In order to protect yourself from online scams, The Money Advice Service suggests you should be very suspicious if:
- Something sounds too good to be true – especially easy money.
- You’re asked to give out personal information such as bank details.
- You are pressured to make a decision and not given time to consider your options.
- You’re asked to pay anything upfront.
- The only contact details for the company are a mobile phone number and PO box address.