The number of borrowers in the UK that have complained about payday lenders is growing rapidly. There has been a 327% increase is complaints filed during the 2016-2017 fiscal year, and this has occurred despite all of the new regulations created by the Financial Conduct Authority (FCA). So the trend is not a good one.
The reason for the complaints varies, but include everything from unfair fees to damaged credit ratings, excessive interest charges as well as aggressive debt collection practices. Some people have even said they should not have been issued a payday loan as they had no means to ever be able to repay the money. Almost all of the major lenders operating in the UK have have one or more complaints filed against them according to the Financial Ombudsman Service (FOS).
Now keep in mind these are only complaints. This does not mean the lenders, such as Wonga, have done something wrong. It just means that the borrower thinks they were not treated per the terms of the new rules and regulations set by the government regulators. The payday lenders do have the ability to respond to the FOS.
How many complaints were filed?
The total number was 10,529. While this in itself may not seem excessive, it still amounts to an over 300% increase from 2016. What is also surprising is that this has occurred even despite the new rules around interest rates, fees, and other practices that have been set by the FCA. So the government is trying to protect residents, but it may not be working as well as they thought. There are even more alternatives to payday loans available to borrowers, but even with increased options the complaints are trending higher.
While the number of people complaint about payday loans has skyrocketed, there have also be complaints about other credit products. This would include everything from credit cards to car loans, mortgages, and more. Those other credit products had about a 200% increase from 2017-2016. This is also a very large number.
Borrowing going up
The fact is that consumer debt in the UK is increasing at rapid rates. This is caused by many factors, and each person may be borrowing for different reasons. A few of the common causes of excessive borrowing cited n 2016 and 2017 include individuals taking out large mortgages to buy the expensive housing in the UK, excessive credit card debt for people trying to keep up with a certain lifestyle, car loans, and other factors.
Some of the borrowing is caused by families living beyond their means. Some of it is from people just struggling to pay their everyday bills, so they take on debt to keep up. No matter the reason using too much debt will bound be to lead to problems.
But payday loans from companies including Quickquid or Wageday may be the most risky type of borrowing. Even though the Financial Conduct Authority has done things to regulate the industry (including caps on interest rates), that form of borrowing is still expensive. It is also risky even the payday lender is not paid back on time, as the fees will add up.
Are complaints valid?
While there are always more being filed, and the process of assessment is ongoing, the fact is about 40% of complaints are being reversed per an independent ombudsman. This means the payday lender is correct in what they did, and the borrower is incorrect. So many borrowers are losing their case.
As we always indicate, people should be wary in turning to a payday lender for money. They should explore all other options first, including credit unions or get help from Citizens Advice first before borrowing. As the risk of using these high priced lenders is too high for most people.