How UK’s unemployment benefit is hacked by phony loan pushers

Fake profiles being set-up on social media websites to push phony loans and grants in order to steal thousands using identity fraud.

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Fake profiles are being set-up on popular social media websites to push phony loans and grants in order to steal thousands of pounds using identity fraud.

A new type of fraud targeting the UK welfare system is being uncovered. The scam, which some believe has lost the UK treasury over £100 million so far, involves unsuspecting victims contacting supposed loan brokers or grant companies through Instagram or Facebook.

Posing as Job Centre staff, Government agents or payday loan fixers, the fraudsters behind the scam then get the victims to hand over confidential material in order to secure a loan in their names.

SimplePayday.co.uk, are a licensed loan broker that specialise in loans for emergencies within the UK. They report that this crime is not only having a devastating effect to the Department of Work and Pensions (Dwp) - the Government department tasked with handling the social security system within the UK. But also the victims. “Victims are often unaware that they are being signed up to a benefit and subsequent loans taken out in their name against that. They are in effect being defrauded, but are left with some of the cheque and all of the debt at the end of it,” Says Simple Payday.

How the scam works

Victims are often approached through popular social media websites with offers of ‘Fast Cash’ or ‘Free Boiler Grants.’ The scammers use personal profiles as well as fake company pages to lure people into making contact. (There have also been reports of ‘classified style’ websites being used by the scammers, including Gumtree and job posting websites like Indeed.)

Once in contact they are urged to send them personal details in order to secure the loan. Victims, we’ve spoken with, often gave them info about previous addresses, names and banking info in the form of copies of their bank card, all in the hope of securing a loan.

Once the fraudsters have all the information they open a claim for Universal Credit in the victim's name and then promptly make a request for a prepaid loan against the future benefit payments the claimant will now receive. The victim receives what they think to be a low interest loan or free Government grant. They then pay the loan broker a fee from the amount that they received.

Around a month down the line, the fraudsters having now vanished, the victim’s receive news that they have been signed up to Universal Credit and also learn of the true origins of the loan they received. Most of the victims are from low-income groups, this plunders their existing child benefit or family-tax credits - as a direct deduction is then taken in order to repay the loan.

Ever heard of Universal Credit?

The benefit system in the UK was streamlined in 2013 in the hope of cutting down on fraudulent and duplicitous applications being made. This involved rebranding and housing the six legacy benefits under one umbrella benefit. Those claiming income support, housing benefit, jobseekers allowance, working tax credits, employment support allowance or child tax credits were now transferred to Universal Credit.

Detractors have long-since derided the Universal Credit system for it’s robustness and lack of agility, while proponents argue that the social security ‘simplifies the benefits system’ while ‘incentivising paid work.’

How the Universal Credit system was hacked

Instagram and Facebook have both cracked down on users posting ads for the scam since news was publicised. However, we found ads still present on both websites, from unlicensed individuals offering loans and duplicitous work from home jobs.

Duplicitous profiles present on Instagram

A post with the hashtag ‘loans’ advertising for ‘work at home’ agents.

Jo’s story

Jo, 23, works with autistic children in a shared residence near Hove, in the UK. She confides that she has previously had credit issues and fallen behind on repayments for a car that she had signed a hire purchase lease for. Her credit profile subsequently lend her to be rejected for a credit card and payday loan application. Then she says she noticed a post on instagram for a free boiler grant. She made contact, with who she then thought, was a company handling the free boiler grants. “The guy on the phone told me there was limited spots, I was urged to sign-up that day and that it was basically free money, but that I had to be quick.”

Having faxed over photocopies of her passport, drivers license and bank card. Jo received confirmation that she would receive a £1000 ‘grant’ the next day and that she would be expected to pay £500 from the £1000 she received to the agent for organising the grant. “I was quite happy to receive the money and didn’t think too much about the fee as I thought it was free money - as he had told me. I never knew I’d be paying it all back, including his share.”

Having been reassured of the legitimacy of the Government payment after seeing the name of the ‘Department of Work and Pensions’ on her bank statement. She only realised her error after the same department wrote to her (a month later) confirming her benefit claim and the details of the cash advance she had received.

Jo has now repaid the loan to Dwp and put the fraud behind her. “I don’t think it’s fair I had to repay the loan. But I guess I had half of it. It was a real burden to be honest, but I’m looking forward now and wise to anything like that happening to me again.”

Don’t be fooled for identification fraud

Stay vigilant - If a post looks too good to be true, as the saying goes, it usually is. Work at home schemes and bad credit loan brokers often have duplicitous intentions when posting to social media platforms. The ease at which fraudsters can be untraced and hidden within the shadows on these platforms means you are almost certainly walking into a trap.

Don’t apply for loans through Facebook or Instagram - Using established and licensed companies for credit makes sense as they are accountable and authorised for the very reason of identification fraud. If you don’t apply you can’t get scammed.

Use credit reporting sites to see if your credit is being fraudulently used - Credit reporting software is like a log of all the credit applications you have made in your adult life. Get familiar with it and learn how to improve it or at the very least check it to make sure someones not already stolen your identification.

Never disclose personal information to untrusted sources - We know that sometimes we all have to give our bank details to companies, but do your research prior to just handing out sensitive information. Banking info should only ever be parsed through a secure URL displaying https:// and a valid encryption certificate.

Free money

All cases referred to the Ombudsman for fraud bear strikingly similar similarities.

  • Predominantly victims are contacted online, either through social media websites or classifieds.
  • With all cases of this type of fraud, the victim pays the broker a fee from the loan or grant money afforded to them.
  • Victims of this fraud range from the young to the old. Single mothers and those working abroad also having been caught up in the fraud. Reports place those in low income families as those mostly affected.

Officials have estimated that the fraud will cost the UK treasury over 20 million pounds. With some insiders fearing the true figure to be closer to 100 million pounds.

Someone who works at the Department of Work and Pensions told us:

“The amount of false or fake applications we received last month was astounding. I’d say over a third of applications last month were part of this loan scam.”




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