At a time of year when many households feel a festive squeeze on their finances, the FCA's latest research highlights that many borrow to cover the cost of Christmas, and the increased risk that loan fraudsters pose to families.

The FCA found almost half of UK adults (47%) feel pressured to spend above their means during Christmas to provide for loved ones, rising to almost two-thirds (64%) for those with children under 18. Two in five (40%) UK adults, and over half of those (52%) with children under 18, are also concerned about being able to afford Christmas spending this year.

In the South West, 45% of UK adults felt pressured to spend above their means and 45% felt worried about being able to afford their Christmas spending this year.

As a result, over a quarter (29%) of parents have borrowed money, or intend to, for Christmas this year. The amount borrowed has increased by more than a third, from £305 last year to £412 this year. According to Debt Free Advice, the debt advice coalition, new debt assessments between December 2022 to March 2023 were 83% higher compared to April to July 2023.

With financial pressure building and more looking to borrow, the FCA is concerned stretched households could be vulnerable to loan fee fraud. Loan fee fraud - where a consumer pays a fee for a loan they never receive – typically results, on average, in a £255 loss.

To combat the rising threat of loan fee fraud, the FCA is taking measures to raise awareness. The FCA is urging consumers looking for a loan to do the 3-step check to protect themselves from scams:

• If you are cold called or emailed, it could be a scam.
• Or if you're asked to pay an upfront fee, it could be a scam.
• Or if you're asked to pay quickly or unusually, it could be a scam. 

If people are unsure whether someone offering a loan is properly regulated, they can find more information on the loan fee fraud website, and search the name of the lender on the FCA Register, before applying for a loan. This will help identify any firms that are actively trying to scam consumers.

This year the FCA has also partnered with Debt Free Advice, a debt advice coalition led by Toynbee Hall, to promote the support they provide individuals experiencing financial stress and challenges with debt during this critical time of year.

Therese Chambers , Executive Director of Enforcement and Market Oversight, said: "Fraudsters will take advantage even of parents' desire to give their children a good Christmas. Don't let them. Remember the 3-step check and protect yourself and your loved ones from loan fee fraud. If you are cold called or emailed, it could be a scam. If you're asked to pay an upfront fee, it could be a scam. And if you are asked to pay quickly or unusually, it could be a scam."

"Many of our clients are already burdened by the weight of utility bill debt, imposed by the ongoing cost of living crisis. Holiday-induced debt can have far-reaching consequences, affecting families' financial stability, mental health, and overall wellbeing."

If a consumer deals with an unauthorised firm, they will not be covered by the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.