On August 19 2014, the Financial Ombudsman Service (FOS) published a raft of information on its website about payday lending. The FOS is the independent body that adjudicates on complaints where the customer and the firm cannot reach agreement, and it is experiencing significant rises in the numbers of complaints being received about these types of loans.
Firstly, the FOS published a warning about payday loan broking websites. It said that many customers were having fees taken from them by brokers who never managed to arrange a loan, and that in some cases customers were being charged multiple fees as their details were passed on to numerous other brokers.
The FOS said that 10,000 people had contacted it about credit brokers so far in 2014, double the total for 2013, although this figure is for the entire credit sector and not just for payday loan brokers. Many firms made immediate refunds as soon as they became aware of the FOS’s involvement.
The FOS also added that many customers of these brokers were misled into believing that the firm they were dealing with was actually a lender.
Senior ombudsman Juliana Francis commented:
“It’s disappointing that people who are already struggling to make ends meet are being misled into thinking that these websites will get them a loan. In too many of the cases we sort out, no loan is provided and people’s bank accounts have been charged a high fee, often multiple times. If money has been taken from your account unfairly or without warning, the good news is the ombudsman is here to help. Give us a call and we can put things right quickly.”
Secondly, almost all of the July/August issue of the Ombudsman News bulletin is devoted to payday lending. Case studies give examples of complaints the FOS has upheld against firms who: applied charges and interest unfairly on a customer in financial difficulty, took a lump sum payment that was contrary to the terms of an agreed payment plan, allowed a customer to roll over her loan some 15 times, granted a loan to a customer with mental capacity issues and granted an unaffordable loan to a customer that amounted to more than his monthly income.
Ms Francis then speaks to Ombudsman News about her experiences of payday loan complaints. She says that very few complaints concern the cost of the loan, and that grievances are much more likely to concern debt collection practices, use of Continuous Payment Authority (CPA) and the impact of a loan on a person’s credit score. One in six complaints centre around a customer saying they never took out a loan with the lender in question.
Finally, the FOS published details of people it had helped with payday loan-related issues. These included: a man who received a visit from a debt collector before the lender had tried to arrange an alternative repayment plan; a woman who was referred by FOS to a debt advice charity; a man who was receiving 12 debt collection calls per day; and a woman who signed up to a CPA without understanding the terms of the arrangement, and whose bank incorrectly refused her request to cancel the CPA.