Payday loan brokers have come under fire for their perceived sneaky tactics in the extraction of consumersí funds, under the faÁade of securing cheaper deals for them, as the number of complaints have soared over the past year.
The Financial Ombudsman Service (FOS) said that it has received over 10, 000 complaints from consumers seething from the manner in which theyíve been treated by payday loan companies. This marks an increase of over twofold for the entirety of 2013, further intensifying clamour for government to introduce even tougher measures on the payday sector to combat the perceived lack of regard shown by credit brokers and payday lendersí for borrowersí fraught with debt.
Data compiled by the Ombudsman reveal that ëpayday loan middlemení have been duping unwitting consumers as they seek to secure loans via credit broking websites, but do not realise they are essentially funnelling their cash to a middleman whilst not receiving the loan they believe they are taking out.
The FOS expressed concern at certain instances where consumersí bank accounts were ravaged multiple times by seedy brokers, due to their bank details being shared amongst credit broking websites.
The payday lending sector has burgeoned in recent years as the number of people struggling with mortgage repayments and other debts has shot up. Last week, the Bank of England lowered its wage growth predictions for the next year with yearly incomes anticipated to continue languishing behind inflation. As such fears that the payday lending sector, despite governmental regulatory measures, will continue to bloom, and more and more people will be subjected to the exorbitant interest rates which are activated following the slightest slip up in repayments.
Existing governmental regulatory measures include limits imposed on payday lenders regarding the number of times a short-term loan can be rolled over, and curbing the number of times a lender can extract cash from a borrowersí bank account to two.
Senior ombudsman Juliana Francis said: “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. “In accordance with Ms Francis remarks, the majority of cases were rectified following the ombudsmanís intervention, as cash was refunded in full. The FOS concurred that in two thirds of the cases, the consumer was correct in thinking that he/she had been maltreated. Peter Tutton, head of policy at StepChange Debt Charity, said: “We continue to see numerous cases where financially vulnerable people suffer at the hands of brokers who take money from their accounts but fail to deliver on the promise of a loan. “This is a well-known problem, but it continues to get worse. The time has come for government and the regulator to ban credit brokers from charging up-front fees.”
It is clear that government ought to bring down the hammer on these middlemen using shady techniques to generate the belief within consumers that they are legitimate lenders. In turn, consumers must be vigilant when agreeing to enter into a loan arrangement, and check if the company they are seeking to conduct business with are legitimate.