FOS hits out at payday loan middlemen

Robyn Hall

August 19, 2014

Since the start of the year thousands of people, many struggling financially, have contacted the ombudsman complaining that payday loan middlemen had drained money from their accounts, without providing them with the loan they were looking for.

In some of the worst cases the ombudsman has seen, consumers’ bank accounts were debited multiple times without warning – as their banking details were passed onto other credit broking websites.

Senior ombudsman Juliana Francis said: “It’s disappointing that people who are already struggling to make ends meet are being misled into thinking that these websites will get them a loan.

“In too many of the cases we sort out, no loan is provided and people’s bank accounts have been charged a high fee, often multiple times.

“If money has been taken from your account unfairly or without warning, the good news is the ombudsman is here to help. Give us a call and we can put things right quickly.”

The ombudsman said that so far this year more than 10,000 people have contacted the ombudsman to complain about credit broking websites, more than double the number in the whole of 2013.

In the majority of cases, the business running the websites refunded the cash they had taken as soon as the ombudsman got involved; and in two-thirds of complaints it investigated, the ombudsman agreed that the consumer had been treated unfairly, while in the remainder of cases the fees had already been refunded.

The ombudsman also highlighted that many people who had used these websites thought they were applying for a loan directly and didn’t realise that they were paying a middleman.

These figures were released by the ombudsman today as it issued a detailed report on the handling of consumer complaints by payday lenders, highlighting the need for the sector to improve its business practices.

Russell Hamblin-Boone, chief executive of the Consumer Finance Association, which represents some of the best known payday lenders but does not represent brokers, said: “The problems caused by some brokers and lead generators bring the whole market into disrepute not least because it is hard for most customers to tell the difference between lenders and these middlemen.

“We agree with the Competition and Markets Authority that these companies should be clear that they are not lenders and we call on the FCA to accelerate its authorisation programme so that there is better co-ordination.

“Currently lenders will need to apply for their credit licences a full year before brokers and other middlemen.”

And he added: “The advice to anyone arranging a loan, either online or on the high street, is to look for a name you know and take the time to check the business has a valid licence to operate and is a member of a trade association. Most importantly, if you aren’t certain about the business or their service, never disclose your personal and bank details.”

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