How to avoid payday loan scams

Stay savvy with Sunny's guide

When you need to borrow money in an emergency situation, it’s important you apply to a reputable company. A payday loan from an unauthorised firm can have serious consequences for you and your financial situation. This is because unauthorised lenders aren’t covered by the rules and regulations put in place by the Financial Conduct Authority (FCA).

The FCA is there to protect consumers who borrow money, and they have put measures in place to limit the extent to which those who take on loans can find themselves in financial difficulty later. Here at Sunny, we work with a market-leading panel of lenders who offer short-term loans for emergency situations and unexpected expenses and are regulated by the FCA, but know that there are many people out there who have fallen for payday loans scams. This is why we have created this guide on how to avoid them.

What is a payday loans scam?

These types of scams are sadly quite common and can involve an individual being contacted by somebody posing as a payday loans company, who offers them an incredible interest rate on a loan. However, there is usually an upfront fee to pay to access the money which could be classed as a set-up fee, a no guarantor fee, or a transfer fee for the cash you hope to receive. Payday

Those who take them up on the offer send this fee, then never see anything from the scammers – the money’s gone and so are they. They may also use the name of a loans company you recognise to draw you in and tell you it’s a limited-time-only deal to convince you to part with your cash.

How to avoid quick cash loan scams

If you’re actively looking for an emergency loan, here are some things to look out for and avoid when considering the right payday loan lender for you:

Check the lender is registered with the FCA and authorised to provide payday loans

First and foremost, you should check that your prospective lender is at least a legitimate credit provider. You can do this by checking the FCA register online. Click here to access the register. It’s very important to access this website through a reputable source too, so if you receive an email with a link to it always type the URL into the search bar, instead of clicking-through. This ensures you are using the right site.

If you find the lender listed but their information is out of date or incomplete, it’s a good idea to give the FCA consumer helpline a call. They can give you more information about the firm and whether they are still operating.

Some lenders and brokers operate under a different name. Sunny, for example, is the trading name for Upward Finance Limited and we are listed on the FCA register, along with our unique reference number. It’s a good idea if you’re ever unsure if a lender or broker is unauthorised and you are speaking to them to ask them for their reference number – then to check this on the register. If they are unable to give you a reference number you may be dealing with a payday loans scam and should break off contact immediately.

Once you’ve confirmed that your lender is a legitimate and authorised business, you may also want to check their reputation by having a look at their reviews and making sure they seem to deliver the kind of service you’re looking for.

Look out for cloned or overseas firms

Some payday loans scams are conducted by setting up an unauthorised firm as a subsidiary in a different country. So you may think you’re applying for a loan through the authorised company but it is in fact a scam being conducted overseas. Once you’ve confirmed they are FCA registered also ensure the company is based in the UK and has a confirmed address.

If you suspect a lender is operating one of these payday loans scams overseas then take a look at this list that features firms that have had warnings issued against them.

Be cautious about lenders who contact you out of the blue

Unsolicited calls, letters or emails should be treated with caution. Before accepting any offer a lender makes to you by phone, email or letter, make sure to do your own, independent research to ensure they are a legitimate business.

All payday loan providers in the UK should be authorised by the Financial Conduct Authority, so searching their register of authorised firms is a good place to start.

If you suspect you have been a victim of a payday loans scam

Stop sending money immediately

If you suspect the lender you are dealing with is not authorised and is conducting a quick cash loans scam, it’s important that you cancel all payments immediately.

You can do this by contacting your bank and asking them to block any attempts to take payment from your card, and cancel any direct debits you’ve set up with them.

If payments are still taken from your card or account after you’ve instructed your bank to block them, then they must return the money to your account.

Report the firm

You should contact the FCA and make them aware of the lender you believe is a scam. You can do this via their consumer helpline.

Try to collect as much information as you possibly can about the lender you’ve been dealing with to help them build up a portfolio they can use to warn others against working with them and to report to the right authorities.

Be cautious of future scams

Scammers see those who have fallen victim to a quick cash loan scam once as an easier target, so they may try to catch you out again.

Stay vigilant and if you spot another scam, follow the steps above. If you do need a payday or short-term loan, always go to a lender you can confirm is a legitimate, authorised credit provider and who you feel offers you the best product.

Need more information?

Want to know more about getting emergency cash? Our guides look into a range of circumstances when you may need a short-term loan, click the links below to read more.

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