MSE News: 'Middlemen' targeting payday loan borrowers with surprise fees

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"Credit brokers are preying on borrowers by 'posing' as payday lenders and charging unexpected fees, says Citizens Advice..."

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'Middlemen' targeting payday loan borrowers with surprise fees




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fermi

Credit brokers ‘posing’ as payday lenders to cash-in on fees

20 January 2014

Cash-strapped consumers are being ripped off by credit brokers who are charging unexpected fees for organising loans, passing bank details onto other brokers who siphon further charges and in some cases are ‘posing’ as payday lenders .

New figures from Citizens Advice finds 2 in 5 people who complained about a credit broker have problems with up-front fees.

Of those, 58% were charged unexpected fees. The other 42% were subject to deceptive practices including charging much higher fees than agreed, fees for services they never signed up to and pretending to be a lender instead of a broker. The fees charged can be as much as £70.

Citizens Advice, which celebrates its 75th anniversary this year, is urging MPs to discuss the issue of credit brokers as part of its debate on payday loan companies today (Monday 20 January). The new evidence from the consumer body suggests these firms are cashing in on the demand for short-term credit and some are ‘posing’ as payday lenders.

Often consumers believe they are dealing directly with a payday loan company because websites or marketing text messages from some brokers do not make it clear they are a broker. Borrowers are then hit with an unexpected fee and in some cases don’t actually go on to get a loan.

The new data is from an analysis of 490 problems reported to the Citizens Advice consumer service in England and Wales about credit brokers during June and July 2013.

A fifth of consumers who complained to the Citizens Advice consumer service had their card details passed onto other brokers without their knowledge and 19% had not applied for a loan. Some people had not even completed the application process but still found their cards being charged.

Based on the analysis Citizens Advice estimates 3,000 problems with credit brokers were reported to the consumer service each year. The consumer body believes many more people are having problems with these services without realising they’re dealing with a credit broker.

A young woman sought help from her local Citizens Advice Bureau after she applied for a payday loan and within seconds was inundated with texts from other payday loan companies. She contacted two or three of them but decided not to take out a loan. Over the next few days she found that several sums had been taken from her bank account by different brokers, despite the fact that no loan had been given.

Citizens Advice evidence finds that, while fees are refundable if a loan isn’t taken out, borrowers are finding themselves up against a brick wall when they try to get their money back.

Citizens Advice analysis of 228 cases where the customer attempted a refund reveals:

• 28% were refused
• 14% were promised a refund but never get it
• 42% struggled to get in touch with their broker to get a refund.

Citizens Advice is calling on the Financial Conduct Authority, which takes on regulation for consumer credit in April, to take an equally tough stance against credit brokers as it is doing for payday loans.

Citizens Advice Chief Executive Gillian Guy said:

“Credit brokers should not be making people’s money problems worse by charging unexpected fees. In some cases, brokers are preying on people’s need for short-term credit and adding to the pain of poor payday lending by posing as a direct lender.

“For many people money is really stretched during January and this could lead to more and more people considering taking out payday loans. Anyone who is finding it a struggle should get advice first and be wary about providing any details online to firms that could be brokers.

“Credit brokers must be transparent about the service they offer and any fees they charge. The FCA needs to recognise the harm menaces in this industry can cause and come down hard on those who break the rules. Preventing unscrupulous brokers from entering the market in the first place, through a strict authorisation process is essential. The FCA should also be seriously concerned about the prevalence of data sharing among brokers as money is being siphoned from people’s bank account without clear permission.”

Duke203

If this is so much of a problem, where are all the stories of ripped off customers on the Loans board?

[Deleted User]

There are loads of them. We seem to get a dozen or so every week. I can't recall how many times I've posted 'write to them for a refund'.

DCFC79

Deleted_User wrote: »

There are loads of them. We seem to get a dozen or so every week. I can't recall how many times I've posted 'write to them for a refund'.

Ive posted same advice a few times, maybe not as much as yourself.

matttye

Duke203 wrote: »

If this is so much of a problem, where are all the stories of ripped off customers on the Loans board?

One recent story > https://forums.moneysavingexpert.com/discussion/4872663

There are other posters on the same thread with similar tales.

RuthnJasper

Duke203 wrote: »

If this is so much of a problem, where are all the stories of ripped off customers on the Loans board?

I've seen more threads about this than pretty-much anything else just lately. But most of them are fairly soul-destroying (in different ways), so you haven't missed much by not reading them Duke.

That said, I'm glad that these "companies" are at last getting some attention in the news. They're even WORSE than payday lenders (imagine that...). Surely only Al-Quaeda, the Taliban, Somali pirates and the Operation Yewtree collective have less morals than this lot...

Clive_Woody

Deleted_User wrote: »

There are loads of them. We seem to get a dozen or so every week. I can't recall how many times I've posted 'write to them for a refund'.

You never did, I thought you said email them....

TurnUpForTheBooks_2

RuthnJasper wrote: »

I've seen more threads about this than pretty-much anything else just lately. But most of them are fairly soul-destroying (in different ways), so you haven't missed much by not reading them Duke.

That said, I'm glad that these "companies" are at last getting some attention in the news. They're even WORSE than payday lenders (imagine that...). Surely only Al-Quaeda, the Taliban, Somali pirates and the Operation Yewtree collective have less morals than this lot...

And on today's form in Praise Vent and Warnings, perhaps TalkTalk and telecoms companies generally should be added to your list?

Monkeyballs

RuthnJasper wrote: »

I've seen more threads about this than pretty-much anything else just lately. But most of them are fairly soul-destroying (in different ways), so you haven't missed much by not reading them Duke.

That said, I'm glad that these "companies" are at last getting some attention in the news. They're even WORSE than payday lenders (imagine that...). Surely only Al-Quaeda, the Taliban, Somali pirates and the Operation Yewtree collective have less morals than this lot...

Totally agree, at least payday lenders actually give you something up front before ripping you off with interest charges...

MB

Money-Saving-King

TurnUpForTheBooks wrote: »

And on today's form in Praise Vent and Warnings, perhaps TalkTalk and telecoms companies generally should be added to your list?

Why? They are posing as payday lenders!