Financial Ombudsman defends borrowers against loan middlemen

Websites promoting cheap credit loans have lured in thousands of potential borrowers who thought they were applying for loans. It turns out that they were simply providing information and paying a fee to a broker who then passed on the lead to other firms. Now the Financial Ombudsman is stepping in to protect these victims that have essentially been ripped off.

What has been occurring is that some websites have been promoting loans, often making promises about low interest rates or approval guarantees. Applicants are supplying their banking information and personal information in order to obtain the loans that they thought they were applying for.

Only there was not actual loan application. This initial information intake is often just a ploy to profit from the desperation of those who need fast money. The information is passed on to real lenders, but those lenders reserve the right to extend a higher interest rate or to deny the loan requests altogether.

The entire process is quite unfair to those who believed they were completing an actual loan application. Instead they were duped into paying fees for something that was never delivered as promised.

As is the case for any consumer mistreatment, the ombudsman can be a formidable opponent to deceptive marketers that are promising dubious loan options. Over 10,000 complaints were fielded so far in the first eight months of 2014. Compared to the fewer than 5,000 complaints logged in 2013, it shows a dangerous upward trend of deception.

Some would-be borrowers had their accounts debited multiple times. Some even had their information passed onto to yet more loan brokers who then charged additional fees.

Warning signs

Loan companies that solicit via email and text message are generally the most likely to be fraudulent or unethical. Borrowers should consider how contact was made to determine the viability of the offer.

They should also check the fine print. The first evidence that a company is a lead broker is usually buried in a disclaimer. This is their attempt to shield themselves from any legal liability. However, making unfair and deceptive claims on a website is dishonest and often illegal.

Help by ombudsman

The majority of the victims that involved the ombudsman found that their fees were promptly refunded. To lessen the risk of an investigation, the companies were quick to respond in a favourable manner.

Most consumer advocates remind consumers that they should never pay to borrow money. If an origination fee is charged, that fee should be deducted from the gross loan proceeds, not from the borrower’s bank account.

Anyone who feels that they have been defrauded or mislead by a deceptive loan offer may request intervention. Complaints may be registered by calling the Financial Ombudsman Service at 0300 123 9 123.