Consumers have been told to be on the look out for companies offering personal loans but requesting the payment of an upfront fee.
The scam involves the payment of an arrangement fee upfront
Charity Citizens Advice said increasing numbers of people were falling for a scam which involves paying money upfront to secure a bogus loan.
The charity added that the lenders target people on low incomes, who could least afford to lose arrangement fees.
Victims are lured by ads in newspapers, online and through cold calls.
The adverts invite people to apply for a loan of up to £10,000 but on the proviso that they pay an arrangement fee, usually of between £30 and £60.
In a further twist when the loan cheque does not arrive, consumer complaints are often directed to a premium rate telephone service.
"These conmen prey on vulnerable individuals and promise them a low-interest loan as an easy solution to their money problems," Peter Tutton Social Policy Officer at Citizens Advice said.
"Unfortunately in most cases there is no loan and this is just a front for scammers looking to make a quick buck," he added.
Last year, the Office of Fair Trading (OFT) issued a similar warning over phoney lenders pocketing arrangement fees.
There is evidence that these bogus loan companies use personal information gathered from their victims to commit further fraud, the OFT added at the time.