OFT warns 50 payday loans companies

RAS

See http://www.oft.gov.uk/news-and-updates/press/2013/20-13

They have 12 weeks in which to improve or face action by the OFT.

fermi

Complaints to the OFT regarding bad practice are very much in order then over the next 12 weeks. :cool:

fermi

http://www.credittoday.co.uk/article/14932/online-news/wonga-responds-to-ofts-payday-report

David Fisher, director of consumer credit at the OFT, told Credit Today:

“The point I want to make is there are 50 lenders we have warned.

“Each one will get a detailed letter setting out our concerns and will have 12 weeks to provide evidence that they have turned things around.

“I am not bothered whether they are unhappy about it.”

Depth_Charge

Hi

Call me cynical or paranoid even, but my bet is they will smoke screen a little and nothing will really change.

It is now basically out of control

Unless drastic action is taken, then it could be the road to apocolypse now debt wise for many vulnerable people and families.

Mind you the DRO & bankruptcy forms unsecured debt sections have enough room for all of them (if appropriate of course:)

Just my take again

RAS

This needs a bump.

fermi

Wonga still allowing large numbers of ID fraud via their inadequate checks.

http://www.bbc.co.uk/programmes/b006mg74/features/wonga-fraud-complaints-continue

moohound

The Wonga guy seemed to think 1 in less than a thousand loans being fraudulent was somehow OK.

fermi

http://www.stepchange.org/Mediacentre/Pressreleases/paydayloanproblemdoubles.aspx

Charity sees doubling of numbers with payday loans

7 May, 2012

New data from StepChange Debt Charity shows that in the last year there has been a staggering rise in the number of people seeking its help with payday loans. From 2011 to 2012 the charity saw a 109 percent increase in the number of its clients with payday loans. In the same period the average amount owed increased by £390. The charity is also deeply concerned by the evidence it sees of widespread malpractice across the payday lending sector.

The data shows that the average payday loan debt of the charity’s clients now exceeds their monthly net income, highlighting the profoundly negative impact payday loans can have on people’s finances and prompting questions as to whether payday loan companies are lending responsibly.

Dramatic rise in numbers and amounts owed

In 2012, the charity helped 36,413 people with payday loan debts, almost 20,000 more than in 2011. While the average payday loan debt of those seeking help from StepChange Debt Charity reached £1,657, up from £1,267 in the previous year.

Struggling to pay

The average monthly income of a client with payday loans is £1,320 per month, but the average payday loan debt is £1,657. Clients are being left in a position where monthly repayments would leave them with no money for living expenses and push them further into a spiral of indebtedness.

Low paid and young worst affected

Last year, 74 percent of those people seeking help with payday loans had a net annual income of less than £20,000. Last year 42 percent of clients aged under 25 had payday loan debts, up from 25 percent in 2011.

Poor industry practice

Payday lenders were the biggest source of complaints made to the charity, despite the fact that only 19 percent of clients have payday loans.

In one case a borrower contacted the charity having taken out eight separate loans with one lender totalling £9,000. His mother then attempted to help by making payments of £50, the lender then proceeded to take £6,000 from her credit card without permission. Interest and charges continued to be added until the total debt reached £15,000 and the client was forced to declare bankruptcy.

StepChange Debt Charity’s director of external affairs Delroy Cornaldi said: “These findings are yet more evidence of the scourge of payday loans. With household finances increasingly under extreme pressure and access credit far less available, many face the unenviable choice of using payday loans simply to make ends meet.

“While recent actions by the Office of Fair Trading (OFT), including the revocation of a lender’s licence and the proposed referral of the industry to the Competition Commission, are welcome news for consumers, there is still widespread problems across the payday loan sector.

“The lenders and their trade bodies must now show they are committed to reform and the enforcement of their codes of practice, and the charity will work with the industry to improve practice. Otherwise regulators will have little choice but to take prompt and serious action to protect consumers.”

As part of its on-going commitment to provide consumers with comprehensive debt help and advice, the charity has launched a new section on its website dedicated to payday loans. It contains information about where to get help with payday loan debt, a brand new guide, the latest statistics, a shareable video, suggestions for loan alternatives, and the chance for consumers to submit their own payday loan experiences. The new website section can be found here.

Monkeyballs

Hi RAS,

Interesting post there... It's also interesting that the % number of loans not rolled over is quite high and I wonder if this is actually due to customers not having the money available to roll the loan over?

I.e. Each month the full loan amount is taken from my account on pay day - as it is taken out on pay day I physically do not have enough to pay the interest only hence I need to re-loan!

There is often no option to have the payment taken out the day after pay day - if there was then more people would roll over and the stats shown be a lot different...

Or, have I missed the point here somewhere?

Monkeyballs

Also, the last time I spoke to my friendly neighbourhood PDL head office re. concerns I had about making a re-payment they referred me to my local outlet who kindly informed me that they would try to take the money and would consider loaning the difference of what they could not claim but would not rule out involving a debt collection agency...

Very friendly and helpful - not!