Guiding consumers since 2009

Scams: How to identify loan scams

By Jessica Anne Wood

When you are desperate for money, the offer of a loan with low interest, no credit check required and very little in the way of paperwork may seem like a blessing, however, if it appears too good to be true, it usually is.

Near the end of 2016, Old Mutual warned consumers about a scam doing the rounds which purported to offer loans from Old Mutual to the value of between R20, 000 and R2 million. This scam claimed to grant loans without the need for a credit check. (See below a reader’s story of how they fell victim to this scam)

There are a number of criteria and requirements that loan providers must adhere to when providing a loan, these are laid out in the National Credit Act (NCA). These have been developed to protect both the consumer and the loans provider against reckless lending. If a loan provider is offering a loan and does not require things such as a credit check, it should be a red flag that it is not a reputable a loan provider and it could be a scam.

A reader’s story

Justmoney was contacted by a reader who fell victim a loans scam, claiming to be a legitimate loans agreement from Old Mutual. For privacy reasons the reader requested to remain anonymous.

A seemingly legitimate document, including the Old Mutual watermark and logo was sent to the public offering a Christmas and New Year’s special. The email claimed to offer customers access to a loan between the value of R20, 000 and R2 million at 5% interest with no credit check required.

After responding to the initial email, stating that s/he wanted to apply for a loan, the reader was sent a loan application form, and was asked to provide a copy of their ID, a copy of their payslip and three month’s bank statement. At this point it could be difficult to identify a scam, as this is information that legitimate loan providers would require too.

Once the documents were submitted, the reader was contacted and a “mandatory Loan Administration Fee of R2, 550” was requested. This fee was supposedly to cover the cost of:

  • Legal contract from the Attorney (which you must sign before we can proceed with payment to your account)
  • Insurance Documentations (In case of any future inability to pay off your loan)

In addition to the above amount, the reader was further contacted for another payment. The email stated: “Note that for every Approved Loan, the borrower is also mandated with a once-off Insurance policy fee covering the loan amount in case of any eventualities and it is to the sum of R3,275 on your Approved Loan Amount (All Insurance Documentations has been Completed and your Payment is needed urgently).”

In both instances the money was to be paid into a Capitec bank account. After realising that s/he had fallen victim to a scam, the reader tried to get their money back from the bank. “They told me they weren’t going to be able to give me my money back because the account had no funds, and [they] were going to close [the account] as they have been alerted to fraudulent activities on the account. The consultant gave me the account holder’s name and surname with a mobile number. I threw it away and didn’t bother myself because, what exactly was it going to do for me in a country like this?”

In addition to contacting the bank, the reader also reached out to Old Mutual, as the scam was carried out using the company’s name. The reader stated: “They asked me questions and said they would investigate. They never got back to me. Not that I am surprised, they are not even worried about their own name to track this woman [down], they have ample information on hand now.”

Feeling despondent about the situation, the reader did not reach out to the authorities, believing that s/he would not get their money back even if they did go to the police.

Identifying the scam

There are a number of standard tips that apply to most types of financial scams, not just loan scams.

Lesedi Seforo, team leader of SARS Operations at the South African Institute of Tax Professionals (Sait), previously warned that consumers should not open or respond to emails from unknown sources. Another red flag is when an email from a financial institution, such as a bank or loans provider, asks for personal information via email.

However, it becomes difficult to identify a scam when the fraudsters are using the name of a well-known institution, such as Old Mutual.

Stuart Marshall, CEO of Old Mutual Finance, noted: “Criminals are using the trust and good name of financial services providers to try to gain the confidence of consumers and to dupe them. The simple advice is, be streetwise and don’t fall for it.

“We must all be vigilant about these ploys because they’re becoming ever more sophisticated. Among these are unsolicited emails that may be presented as a communication from Old Mutual using fake Old Mutual letterheads and logos, or falsely claiming to originate from an Old Mutual financial adviser.”

Marshall warns against loans offered via email, particularly those that request an upfront administration fees. “As a customer, you should never be required to pay this.”

He added: “Do not under any circumstances get involved in these scams, no matter how enticing they seem. In fact, our experience is that the more lucrative or unbelievable they seem, the likelier they are to be a scam.”

Marshall offered the following points to help identify a scam:

  • The email address: “ for example is clearly bogus as “safrica” isn’t Old Mutual’s domain. A registered, legitimate company will have its own domain reflected in its email address,” explained Marshall.
  • Reply email address differs from sender: If the email you are asked to reply to differs from that of the sender be cautious. “A sender’s email address such as “application form from” asking you to reply to “loan approval from” is clearly not legitimate.” Take heed of the domain name for all email addresses.
  • The bank account is in a person’s name: If an email asks for a payment to be made into an account that is held in a person’s name and not a company, it is likely a scam.
  • Poor grammar or spelling: Bad spelling and grammar in an email is generally a sign that you should be wary. Also pay attention to the logos on the documents, and whether or not they appear to have been copied from another document and paste on the document you have received.
  • “Be suspicious if an offer or return on investment seems too good to be true. A loan with an interest rate of 3%, when the prime lending rate is 9.5%, for example, should trigger alarm bells,” added Marshall.

If you have any doubt about the authenticity of an email and the product it is offering, contact the company’s customer service centre to check. Rather than using the contact information on the email sent to you, do a Google search for the company’s website and use the contact number listed there.

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