Payday loans attacked for ëillegally high feesí

A recent study has suggested that certain payday loan firms may have been charging illegally high default fees for people who have failed to pay their loans back in time.
Prominent consumer organisation Which? identified that they had found default charges of £30 being applied to some borrowerís accounts arguing that this is too high for the level of debt that it is being charged to.
The company added that payday loan firms have been guilty of exploiting those in severe financial difficulties by distributing loans without doing the necessary finance checks to confirm whether a borrower can afford repayment or not.
The news comes during a period of intense scrutiny on the conduct of payday loan firms, with many pointing the finger at them for the huge levels of personal debt in the UK at the moment.
Payday loans are short term forms of finance that allow borrowers to acquire funding on a one month basis after which they have to pay the full amount borrowed plus interest back. The interest rates are usually severely high, with 1500% APR a typical interest charge on an offering from a payday firm.
And with the period after Christmas usually characterised as the most difficult time for personal finances, it is likely Which? has released the details of their study in order to warn people about the consequences of taking out a payday loan without being able to pay if back quickly
Wonga charges
Which? analysed the default charges applied by 17 payday firms and compellingly found that market leader Wonga currently applies the highest late fees on their customer accounts with a £30 charge.
A further ten companies were found to charge late fees in excess of £20, whilst four applied fees of £25 or over.
Which? have questioned legality of such charges, arguing that applying ëexcessiveí fees to a borrowerís outstanding balance is in breach of the Unfair Consumer Contracts Regulation that was set up back in 1999.
According to the regulation, lenders are not allowed to apply fees that are disproportionately high to the amount borrowed in the first place. The company added that it is unfair that people who default on £100 loans end up paying late fees that are higher than the interest they are paying each month. 
Wonga have responded by rejecting the claims made by Which? and have argued that the £30 default fees are a fair charge to ask for considering how clearly they are specified in the borrowerís original loan arrangement and the costs of trying to collect outstanding balances in the first place.
A statement from Wonga read: “As with all our costs, we are completely transparent about our default fee and it’s clear to customers when they apply for a loan, and at least three further times before their repayment date.
“On the rare occasions where people can’t repay, we always encourage them to get in touch with us so we can do everything we can to agree an affordable repayment plan, including freezing interest and charges.”
Which? however have hit back and have dismissed Wongaís claims that they clearly specify the charges and costs that come along with a payday loan, citing that they have been using late fees as a way of attracting customers through lower interest charges.
This, Which? has argued, has led to people acquiring loans without being fully aware of the costs, and represents a clear exploitation of those who are in debt. 
The Financial Conduct Authority is expected to take over as the industry regulator in April this year and have signalled their intention to seriously clamp down on the conduct of payday lenders in order to prevent people from having debts that spiral out of control. 
Russell Hamblin-Boone, chief executive of the Consumer Finance Association which represents short-term lenders, said: “Of course, they can only do this when a customer informs them of their inability to pay due to their financial difficulty, so, although it can be hard to talk about it, the best thing customers can do is contact their lender as soon as possible to discuss their situation.
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