UK

Complaints About Payday Lenders Hit New High, Watchdog Finds In Public's Favour In 72% Of Cases

06/03/2013 14:55 GMT | Updated 06/03/2013 15:51 GMT

If you needed any more convincing that the payday loan sector needs investigating for bad practice, try this; the financial ombudsman has seen complaints about payday lenders increase to 50 a month - and the majority of cases are found in the public's favour.

According to new figures released on Wednesday, the first nine months of this financial year – April to December 2012 saw the Ombudsman receive 387 new complaints, that's more than the 296 complaints it received during the whole of the previous financial year.

"We are currently finding in the consumer's favour in nearly three-quarters (72%) of complaints against payday lenders," the Ombudsman said.

"Many of the enquiries we receive – 2,650 so far this year – never go on to become full complaints. This may be because when payday lenders are aware that the ombudsman might step in, they take the opportunity to resolve the disputes.

"However, many people we've spoken to are reluctant to admit they're struggling financially – and it's likely that a significant proportion of people who've taken out these loans don't know they are entitled to bring a complaint to the ombudsman."

The main complaint themes are:

  • the loan was unaffordable and should not have been given in the first place;
  • the charges that are being applied to the loan are too high;
  • the loan provider will not accept a suitable repayment plan;

"The fact that we're seeing more complaints about payday loans is inevitable, as people who are finding it hard to obtain credit turn to payday lenders to make ends meet," said the Ombudsman.

"Many of those we speak to don't want their friends and family to find out that they're struggling financially - but it's important to remember that if you have a problem with a credit provider, there is help out there if things go wrong."

Worryingly, the Ombudsman has also started to see complaints from people saying they never took out the payday loan and their name and details have been used fraudulently.

One of the biggest payday lenders on the market, Wonga, has come under increasing pressure after several reports of fraudulently obtained payday loans from the lender surfaced.

In January, Lee Boyce told the Mail's This Is Money that £1,000 had been taken out in his name without his knowledge, and found it only took his name and his address to fraudulently take out that loan.

The money owed was written off, but Boyce was never told how it was that the fake loan was able to be processed.

In another report, Collette Pendreigh had £700 taken from her account despite never having taken out a loan with Wonga.

She called Wonga which told her to call the police to get a crime reference number, the police told her to call her bank.

At this point she contacted This is Money who spoke to Wonga about the issue.

Wonga again refunded her money, and claimed it had already started to deal with the issue as less than 24 hours had passed since she first contacted them.