Citizens Advice says three in four payday loans may breach regulations

5th August 2013

As many as three out of four pay day loans may breach the loan regulations says charity Citizens Advice as it urges borrowers to consider complaining to the Financial Ombudsman Service writes Philip Scott.

Three in four payday borrowers who got advice from the Citizens Advice consumer service were found to have been treated wrongfully and could have grounds for an official complaint to FOS says the national charity.

On the back of the research Citizens Advice has today launched a month-long campaign urging payday loan customers not to let predatory lenders get away with treating them unfairly.

Citizens Advice’s analysis of 665 payday loan cases, reported to its consumer service over the first six months of the year, concluded that at least 76 per cent could have grounds for an official complaint.

Citizens Advice chief executive Gillian Guy says: “The level of debt and hardship caused by some payday loans is absolutely scandalous and people often feel completely powerless to do anything about it. But consumers can fight back.

“If you are struggling to pay back the loan Citizens Advice can help you sort out a reasonable repayment plan and if you make a successful complaint to the Financial Ombudsman service you could find you get a refund for an unauthorised payment or compensation for unfair treatment.”

The research from the national charity found that 20 per cent or one in five people were chased for a loan they had not even taken out.

Another 12 per cent of cases involved harassment whereby lenders pestered people with phone calls and text messages rather than accept affordable repayment offers and 10 per cent of complaints were about lenders’ unfair treatment of people in financial difficulties.

In addition, 80 per cent were not told by their lender how to complain if there was a problem. Consumers who are finding it difficult to raise their payday loan problem with their lender can contact the Financial Ombudsman who should help them through the complaint process.

There were 160 complaints made to the Financial Ombudsman between April and June this year about payday loans, with 72 per cent upheld in favour of the consumer.

If a complaint is upheld by the Financial Ombudsman, and the consumer has lost out as a result, the lender can be ordered to put things right. Consumers could get a refund on loan repayments, interest or default charges or compensation for any inconvenience caused.

Guy adds: “By making your voice heard you will expose the bad behaviour of lenders and put pressure on them to clean up their act which could help stop similar problems happening to other people.”

In May, evidence from Citizens Advice revealed that payday lenders are breaking 12 out of 14 promises they made to treat customers fairly.

Earlier this year the Office of Fair Trading reported in its payday lending compliance review that 38 of the 50 lenders it inspected failed to comply with at least one of the complaint handling rules of the Financial Ombudsman Service.

If you are struggling with a payday loan, Citizens Advice advises the following:

 

 

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