But it could be just the tip of the iceberg, says Financial Ombudsman Service.
But it could be just the tip of the iceberg, says Financial Ombudsman Service
Complaints made against the payday lending industry to the Financial Ombudsman have doubled in the past year, according to the watchdog.
But the ombudsman also expressed puzzlement over the relatively small number of complaints made about the industry.
As Patrick Collinson of the Guardian has shown, a total of 399,939 people complained about payment protection insurance last year, while complaints for payday loans was a fraction of that at 794.
The watchdog said that many consumers were unaware they could make a complaint, and that lenders themselves – small firms as well as big ones – are doing nothing to highlight such services.
Complaints about payday lending are on the rise, and have been for some time. This time last year the industry was exposed by Citizens Advice as being “out of control”, with lenders frequently selling loans to people aged 18 and under, people with severe mental health difficulties and people who were drunk when they took on the debt.
At around the same time in 2013, complaints made to the Financial Ombudsman Service about the industry shot up 83 per cent – the third highest rise of any sector with the exception of the home credit industry (139 per cent) and payment protection insurance (PPI – 140 per cent).
Indeed, Citizens Advice found that many more people had cause to complain to the service. In its in-depth analysis of 665 payday loan cases, reported to its consumer service between 1 January and 30 June 2013, the charity found that at least 76 per cent of borrowers could have grounds for an official complaint to the Financial Ombudsman.
Those grounds included the 1 in 5 possible cases of fraud – where a person was chased for a loan they hadn’t taken out, the third of instances where money was withdrawn from a borrower’s account without an advance warning (potentially leaving them in a very precarious financial situation if they have other outgoings), harassment (including fake letters by lawyers, something we now know was practiced by Wonga), and the 1 in 10 loans that have been deemed unfair treatment of people in financial difficulties.
So clearly there should be many more complaints made about the industry than there currently are, even though that number has more than doubled. So what is happening?
The previously mentioned Patrick Collinson wonders whether it is because complaining is a middle-income, middle-aged response, and that those customers who are taking out payday loans are not au fait with using such services as the Financial Ombudsman.
There is some truth in this. With relatively little interaction with means to settle financial discrepancies, it is easy to see why many consumers would choose to find their own ways out of such problems.
However the industry those consumers are up against is experienced in pushing more loans, rather than responding to their efforts of financial resilience.
At a meeting recently I was able to see the volume of promotional emails one payday loan borrower received after falling on hard times with debt. In a six-month period, rather than assisting with help, or leaving the borrower be, the company sent the person dozens of emails offering larger and more expensive loans.
Then there is the shame. Many consumers don’t seek the help they need because of the shame associated with debt.
And yet the shame, if there is any, should be squarely leveled on the companies themselves who so often lend money irresponsibly and with impunity.
Charities like Citizens Advice and StepChange have stepped up to the challenge and advocated on behalf of greater complaining for the wrongs of payday lending. Trades Unions like Unite the Union and Unison have done the same. Civil society corrections to predatory capitalist ills.
Consumers must not let these companies get away with it.
Carl Packman is a contributing editor to Left Foot Forward and the author of Loansharks: The Rise and Rise of Payday Lending
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