Payday loan complaints reach five year high

boo_star

Willing2Learn wrote: »

I think tough affordability and income checks should be required by PDL companies, given their target market. How can they justify giving repeated loans to folks who are not employed for example?

But why are prime lenders being given a free pass in this regard?

FWIW I do think that PDLs should be checking affordability but frankly ALL lenders should be and for some reason nobody seems to bat an eyelid at banks and other mainstream lenders handing out fairly large sums of money based on what people tell them they're earning whereas PDLs get crucified for doing the exact same thing.

Turtle87

Presumably because the pay day lenders rip you off and the amount paid in interest is EXTREMLEY high in comparison.

boo_star

Turtle87 wrote: »

Presumably because the pay day lenders rip you off and the amount paid in interest is EXTREMLEY high in comparison.

That's it?

So lending money to people who can't afford it is fine as long as you only charge 10% APR?

Turtle87

They aren’t given a free pass. If you look online at the ombudsman decisions, you’ll see many other complaints about mainstream lenders.

My point is, often people have paid thousands of pounds in interest for payday loans so these take priority as the redress can be a large amount.

Also, banks would typically of refused loans to people as they have more stringent affordability checks. This is why people took payday loans...

Nasqueron

The high rates are only an issue with longer loans and roll overs - if you imagine 3650% interest, per day - 10%, for a loan of 2-3 days for £500 for example, it's not a huge amount of interest. Pay day loans can certainly be a problem but the alternative reality for a lot of poor people is loan sharks who will harm people for not paying back, which is better - regulated and responsible (if properly enforced) pay day loans or Big Vinnie who'll break your finger?

boo_star

Turtle87 wrote: »

Also, banks would typically of refused loans to people as they have more stringent affordability checks. This is why people took payday loans...

But a banks "affordability check" is usually going to be based on average spending based upon income rather than the customers actual I&E which is better, but only marginally so than PDL's.

And the point I was discussing was that "PDL's are lending to people who are unemployed" and the argument that there should be stringent "income checks" before they lend. Most banks don't ask for proof of income either and can easily end up lending to someone who is unemployed as they will usually take what people write down on application forms at face value rather than asking for proof. This practice is absolutely given a free pass by regulators and by people on here and seemingly by you too, simply because their interest rates aren't silly, which is ludicrous IMO.

Turtle87

boo_star wrote: »

Most banks don't ask for proof of income either and can easily end up lending to someone who is unemployed as they will usually take what people write down on application forms at face value rather than asking for proof. This practice is absolutely given a free pass by regulators and by people on here and seemingly by you too, simply because their interest rates aren't silly, which is ludicrous IMO.

As I said, if you look online at the ombudsman decisions, complaints are often upheld against the traditional lenders too. If whoever lent irresponsibly, they should rightly be pulled up on it. There's just a huge focus on pay day loan claims at the moment because often the redress can be large for a relativity small loan amounts due to the interest amounts being so high.

Willing2Learn

Nasqueron wrote: »

The high rates are only an issue with longer loans and roll overs - if you imagine 3650% interest, per day - 10%, for a loan of 2-3 days for £500 for example, it's not a huge amount of interest. Pay day loans can certainly be a problem but the alternative reality for a lot of poor people is loan sharks who will harm people for not paying back, which is better - regulated and responsible (if properly enforced) pay day loans or Big Vinnie who'll break your finger?

I have used a loan shark several times (over 20 years ago) and I've had a PDL too (over 10 years ago). I found the experience with regard to checking id paperwork etc to be pretty similar. The PDL, in addition, asked for paperwork to prove income. They both allow debts to roll over in a very irresponsible way.

Clive_Woody

Turtle87 wrote: »

If only they were responsible lenders in the first place

There are plenty of "responsible" lenders that people could pick, unfortunately they are reluctant to lend to irresponsible borrowers (people who are unlikely/unable to pay back what they borrowed).

With the decline in Payday type lenders it's going to become increasingly hard for this type of borrower to find someone who will lend them money (at any rate).

Willing2Learn

And the same news from another source (slightly different perspectives). Apparently, in some cases the FOS has dealt with customers who held more than 100 payday loans at one time!!! Talk about irresponsible lending!


Source : https://www.theguardian.com/money/2019/may/15/payday-lenders-face-sharp-criticism-as-complaints-rise-130

The finance industry’s adjudicator has criticised the “unacceptable” behaviour of some payday lenders after a 130% rise in complaints, which it said goes beyond the practices of recently collapsed industry leader Wonga.

The Financial Ombudsman Service (FOS) said the surge contributed to a 14% rise in complaints across the financial sector, which reached a five-year high of 388,392 over the 12 months to March.

The rise in payday lending complaints more than offset a drop in PPI complaints, which accounted for fewer than half of new disputes for the first time in a decade, as the August deadline for claims looms.

Payday loans accounted for 39,715 of the new disputes, marking a 130% rise from a year earlier. The FOS annual report called it a “startling” rise and said the conduct in this sector “has been unacceptable”.