RBS highlights scale of problem with payday brokers
In late October 2014, Royal Bank of Scotland (RBS) revealed that it was receiving hundreds of calls each day from RBS and NatWest customers upset about payday loan broker fees having been taken from their account. At the height of the problem, as many as 800 such calls were being received on a daily basis. The number has now fallen to 250, although RBS thinks this figure may increase again around Christmas time.
Customers using a payday loan broker may be charged a fee, typically £50 to £75, by that firm, even if they don’t manage to find a suitable lender. The broker may also pass customer details to other brokers or other types of firm, and these firms may also levy their own fees.
According to an article in the Times newspaper, the brokers may pass details on to lenders as well, and sometimes the lenders will deduct a fee even though they fail to offer the customer a loan.
NatWest gave details of one man who did manage to obtain a £100 payday loan via a broker, but who was charged £700 in fees. In August 2014, the BBC reported that one woman had £700 in fees taken by ten different firms, and who did not receive a loan in return.
Sometimes the brokers mislead customers into believing that they lend money themselves.
RBS said it has ended its payment arrangements with some 20 brokers, and urged customers to contact them as soon as possible should they discover that they have had unexpected fees debited from their account.
Terry Lawson, Head of Fraud and Chargeback for RBS said:
“Since July, we’ve seen large numbers of customers incurring charges they don’t expect when using a payday loan broker. At its height, we were getting more than 800 calls a day on unexpected fees, but we’re pleased to say we’re seeing this decrease on account of the actions we’re taking to help stop these sharp practices.”
RBS has called on the regulator, the Financial Conduct Authority, to take firm action against broker firms that fail to treat customers fairly. The sector has also attracted the attention of the Competition and Markets Authority, which is reported to be considering introducing a requirement for brokers to give a starkly worded ‘health warning’, along the lines of: “We sell your application details on the best terms for us, rather than you.”
The Financial Ombudsman Service received 11,405 complaints about credit brokers between April 1 and September 30 2014, compared to 6,375 for the entire 12 months to March 31 2014. Of these 6,375, almost two thirds were settled in the customer’s favour.
Senior ombudsman Juliana Francis said:
“It’s disappointing to see that more and more people are being misled into thinking that these credit broking 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’ll help you quickly get things sorted.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.