As unscrupulous and often unregulated firms attempt to take of advantage of the cost-of-living crisis, the Financial Conduct Authority (FCA) revealed it had intervened to amend or withdraw 4,151 financial promotions between July and September, the highest level on record.

Retail lending, investments and banking are the sectors with the highest rate of amends or withdrawal of adverts and amount to 95% of the FCA’s interventions with authorised firms.

The watchdog highlighted that it had seen several cases involving unauthorised firms and individuals seeking to take advantage of the rising cost of living. During the period, the FCA issued 303 warnings about such unauthorised firms and individuals, with over 20% relating to clone scams, in which fraudsters pretend to be from a real firm such as a bank or building society.

Buy now, pay later under the microscope

The FCA is also keeping a close eye on the Buy now, pay later (BNPL) market. Although the FCA does not yet regulate BNPL, it warned BNPL firms about misleading promotions earlier this year.

BNPL is a form of credit allowing customers to spread the cost of purchases over a number of payments and months without paying interest. However, where customers fail to make a payment or pay late, providers can and do impose penalty charges and interest.

The watchdog issued 27,000 firms with a ‘Dear CEO’ letter setting out its expectations for firms offering BNPL products.

The letter warned firms offering such products that although some agreements are unregulated, the financial promotions of all BNPL products must comply with the financial promotion rules.

In one case, the FCA’s intervention resulted in 66 BNPL promotions from a single firm across various social media platforms being amended or withdrawn. It said the adverts did not give fair or prominent risk warnings and were misleading about fees.

Loan fee fraud rising

The FCA also took action to write to borrowers who were included in a mailing list being used by scammers to carry out “loan fee” or “advanced fee” fraud. With this type of scam becoming more common as the cost of living rises, the FCA relaunched its ScamSmart campaign around loan fee fraud over the summer to help raise awareness among borrowers.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “As consumers feel the financial squeeze, they could be tempted by high risk, unregulated products and services or they could become a target for scammers preying on moments of vulnerability.

“As a result, we’re doing even more to tackle false claims in adverts, issue prompt warnings to consumers, and we continue to engage with the largest tech and social media platforms as they also play an important part in protecting consumers from online harm. This is why changes to the Online Safety Bill to cover paid-for financial services advertising online are very much needed right now.”

With online safety very much front of mind, the Competitions and Marketing Authority yesterday published new guidance for social media companies, brands, and influencers to follow so that people can easily spot a paid-for online endorsement.

Five tips to stay safe

Tom Selby, head of retirement policy at AJ Bell, said: “It is positive that the regulator is clamping down on dodgy adverts, but the scale of the financial universe and the fact many of the most dangerous firms are not regulated means individuals need to arm themselves to avoid becoming a victim of financial fraud.”

He lists the following five tips to help you stay safe and avoid being scammed:

1) If someone contacts you out of the blue, ignore

Most people at some point will have received a phone call from someone they don’t know claiming to offer an incredible investment opportunity for their savings or a ‘pension review’ service. If this happens, hang up immediately.

Equally, don’t respond to text messages, emails or social media contact from someone you don’t know claiming to hold the key to retirement nirvana. In all likelihood this will be a scammer phishing for victims, so, whatever you do, don’t take the bait.

2) Don’t deal with unregulated ‘advisers’

While telephone, text, email and social media remain the primary weapons of choice for the modern con artist, some continue to knock on doors; usually targeting older people they think are more likely to be vulnerable. Make sure you only deal with FCA-regulated advisers – this is particularly important as if you are sold an investment by an unregulated individual, you won’t have recourse to compensation.

3) Be wary of overseas or crypto investments promising sky-high returns

Scammers often promise double-digit returns through exotic investments in far-flung locations. Promoting cryptocurrency investment ‘opportunities’ has also become an increasingly popular route for fraudsters.

If you’re told you can get 10%+ annual returns from a teak plantation in South America or a hotel room in Spain, tread carefully and do your due diligence. Often fraudsters will advertise investments in an asset that doesn’t exist or hasn’t yet been built, so don’t hand over your cash unless you’re 100% confident you’re being sold a genuine, bona fide investment.

4) Watch out for schemes offering ‘guaranteed’ returns

Nothing is guaranteed when it comes to investments. If a company you’ve never heard of says it can deliver GUARANTEED returns of any amount, don’t touch them with a barge pole.

5) Don’t rush to make a decision

Don’t be forced into doing something you aren’t comfortable with and might regret by a pushy salesman or saleswoman desperate to boost their commission. Your pension might just be the most valuable asset you ever own, so invest it wisely. And if you are at all unsure, check the FCA’s ScamSmart website or speak to a regulated financial adviser before making any decision.