UK consumers looking for loans are being stung for thousands of pounds by a new advance fee scam.

Interestingly this scam, which originates from Canada has so far avoided the internet and is using advertisements in local newspapers. With people wanting to offset the costs of Christmas the newspaper adverts, which offer fast loans regardless of credit history, appear safer following the growing problem of internet scares.

Consumers who respond to these adverts are told that their loan has been agreed but before they can have the money they will need to pay a fee to cover insurance of the loan. The consumers are asked to pay this advance fee by money order via Western Union or Money Gram.

Once this advance fee is paid the consumer never hears from the company again and the loan is never received. The Office of Fair Trading (OFT) which has issued a warning said it was aware of victims who have lost up to £4,000.

The adverts, which have a freephone number to call, are usually placed in the classified sections of free or local newspapers. The OFT has called on newspapers to be vigilant against this scam and be wary of placing adverts which do not comply with the new Consumer Credit (Advertisements) Regulations 2004, which govern what form and content an advert for credit should take.

The OFT is working closely with the authorities in Canada to take action against these fraudsters. It said consumers who have been contacted in this scam should report this to it by calling 08457 22 44 99 or by emailing enquiries@oft.gov.uk.

. The OFT is also concerned that organised criminal gangs may be using the personal details collected from victims of this scam to commit further fraud.