Asked to pay a fee for a loan? How to spot a loan scam

You need money this week. You see an SMS or a Facebook advert that says your loan is approved, with no credit check. Then you are asked to pay a fee first. This is one of the most common loan scams in South Africa. This post explains how it works and what to do.

What is an upfront fee loan scam?

A scammer pretends to be a lender. They say you qualify for a loan, for example R 5 000. Before the money is paid out, they ask you to pay a small amount. The loan never arrives. The scammer takes your money and often asks for more.

The South African Fraud Prevention Service and the Micro Finance South Africa industry body have warned about this scam. The National Credit Regulator (NCR) says only lenders registered with it may lend to the public.

What names do the fees use?

The scammer gives the fee a reason that sounds official. These are the names people have reported:

• Processing fee
• Security deposit
• Insurance
• Legal or document fee
• Tax

One news report told of a pensioner in Stanger who paid R 1 250 as a document fee for a promised loan of R 10 000. The pensioner was then asked to pay more. The loan did not come.

What are the warning signs?

• You are asked to pay before you get any money.
• You are asked to pay by cash deposit, e-wallet or a voucher, and not through a normal debit order.
• The loan is approved in minutes without any checks.
• There is no NCR registration number on the website, the messages or the agreement.
• The person pushes you to pay today, or says the offer will end.
• You are asked to keep it secret, or to keep sending money for a new reason.

One of these signs is enough to stop and check.

How do you check a lender?

1. Ask for the lender's full business name and NCR registration number.
2. Go to the NCR website, ncr.org.za, and look in the list of registered credit providers.
3. Make sure the name on the list is the same as the name you were given. Scammers sometimes copy a name that is close to a real company.
4. Type the web address yourself. Do not use a link from an SMS or a chat message.

We explain this in more detail in How to check if a money lender is registered. If the lender is not on the list, do not pay and do not send your documents.

What if you already paid?

Do not pay again, even if you are told this is the last payment. A second fee does not release the first one.

1. Keep every message, receipt, phone number and bank or wallet record.
2. Tell your bank or wallet provider quickly. They may be able to act on a recent payment, but they cannot promise to get it back.
3. Report it to the South African Police Service and open a case. Keep the case number.
4. Report it to the NCR at ncr.org.za. The NCR also takes reports about lenders who keep a customer's ID, bank card or SASSA card.
5. If you shared your ID number or bank details, tell your bank. Ask them to watch your account.

Do not pay anyone who says they can get your money back for a fee. That is a second scam. You did nothing wrong by being tricked. These scams are made to work on people who are under pressure.

What can you do instead?

If you must borrow, use a lender that is registered, read the full agreement and ask for the total you will pay back in rands before you sign. For a stokvel as a safer way to save with other people, read How does a stokvel work, and how to join one safely.

Mocash is one small way to earn extra by doing surveys and offers and withdrawing your rewards. It is slow, it is not guaranteed and it is not a replacement for income.