10Apr

Citizens Advice, a nationwide charity that offers advice on consumer issues, has written to consumer credit regulator the Office of Fair Trading (OFT) calling on it to withdraw the Consumer Credit Licences of four payday lenders and three debt collection firms. The firms have not been named, but it is reported that two of the lenders are well-known companies.

In the case of the four payday lenders, Citizens Advice has requested that the OFT exercises its new power, granted in February 2013 under the terms of the Financial Services Act, to revoke their licences with immediate effect. Previously, firms who the OFT wished to withdraw licences from could continue trading while they appealed against the judgement.

Citizens Advice said that the four lenders were causing their customers “significant distress” and were making their debt problems worse. It believes it has evidence that the lenders are:

  • Charging excessive fees
  • Taking money from customers who have satisfied their debts
  • Chasing people for repayment of loans they never applied for
  • Being aggressive and abusive to customers

The debt collectors were said to be engaging in “aggressive and threatening behaviour”, and overstating their powers.

The OFT has promised to consider the matters raised in the letter, but said it could not comment further at this stage.

Citizens Advice Chief Executive Gillian Guy said: “The OFT must take immediate action to investigate and suspend these companies. These firms pose a real risk to people looking to get a short term loan to help tide them over. Our evidence shows these lenders are behaving as a law unto themselves.”

Citizens Advice is conducting a 12 month long study of the payday loan market, and is compiling evidence regarding other lenders it believes are acting inappropriately.

In March 2013, the OFT published the final results of a compliance review of the payday lending sector, where they found “evidence of widespread irresponsible lending”. As a result of this review, all 50 leading payday lenders were given 12 weeks to improve their practices and procedures or face enforcement action from the OFT, action which could include the removal of their licences. So could some of the UK’s best known payday lenders soon be forced to cease trading?

From April 2014, all consumer credit firms will be subject to the stricter regulation of the Financial Conduct Authority (FCA), one of the bodies which replaced the former Financial Services Authority on 1 April 2013. The FCA has said it will regard payday lenders and debt collectors as high risk companies, who will be required to pay higher fees, and has said that scrutinising the payday loan sector will be a top priority.

National Debtline, which gives free assistance to people with debt problems, said that calls from borrowers with payday loan difficulties increased by 94% in 2012, compared to the previous year. The Financial Ombudsman Service, which assesses complaints about financial services organisations, received 30% more complaints about payday loans in the nine months from April to December 2012 than it had in the entire financial year from April 2011 to March 2012.