Payday lenders have recently been very much in the news, with Wonga being singled out for severe criticism after it was discovered that it had sent out letters threatening legal action to defaulters, even though the legal firm named on the letterhead was entirely fictitious. Although payday lenders and Wonga in particular are not alone in this deception – the student loans body was also found to have used the same tactic – it is a disturbing trend. This issue however was not included in the 63% of all complaints upheld by the Financial Services Ombudsman in the past twelve months. This figure is roughly level across the payday loan industry, with no one company being particularly culpable, but should be compared to the 10% rate of upheld complaints typical of banks, the Nationwide being the one quoted as a sample.
Reasons vary for complaints
Most of the complaints received – although not necessarily the most commonly upheld – concerned loans which the complainant claimed had not been taken out by them. Because payday loans are applied for and granted online it is very easy for people to take them out in someone else’s name, as long as they have access to certain personal details. The matter of identity fraud does not just affect the payday loan sector, but the circumstances of how payday loans are applied for and the speed with which they are processed does leave the system particularly open to abuse. General administration flaws were also flagged in the complaints – which reached record numbers in the past year – and inflexible attitudes towards people having problems meeting payments.
Changes in the lending rules
Part of the problem with payday loans for many people is that they feel they don’t have the position explained to them properly in the event of their being unable to meet payments. The rules have now been tightened up, preventing the companies from allowing more than two roll-overs of the payments, in the event of default. They will also be prevented in future from attempting to take money more than twice from a person’s bank account in the event of failure to pay – before the new legislation there was no limit to the attempts that could be made, which inevitably caused people to fall into further financial hardship. Interest rates were another cause for concern with some lenders charging 5000% but this is only the ‘base’ rate – fees for defaulting and restructuring the loan can make the actual rate far higher.
It has been estimated that many thousands more people have complaints about the payday loan industry but are unwilling to come forward because they are embarrassed or ashamed at the problems they are encountering. At Dissolve Debt we have been helping people with financial problems for well over a decade and in this time we have seen problems relating to this sector soar and we have a wide experience in these issues. We don’t judge, we’re here to help, so give us a call on 0800 0122 111 from a landline or 0161 926 7670 (a cheaper number we provide for if you are calling from a mobile).