The financial sector arbiter criticized the “unacceptable” behavior of some payday lenders after a 130% increase in complaints, which he said goes beyond the practices of recently collapsed industry leader Wonga.
The Financial Ombudsman Service (FOS) said the increase contributed to a 14% increase in complaints in the financial sector, which reached a five-year high of 388,392 in the 12 months leading up to March.
The rise in payday loan complaints more than offset a drop in PPI complaints, which accounted for less than half of new litigation for the first time in a decade, as the August deadline for claims looms .
Payday loans accounted for 39,715 of new litigation, an increase of 130% from the previous year. The FOS annual report called the increase “surprising” and said that the conduct in this area “has been unacceptable”.
Caroline Wayman, Chief Ombudsman and CEO of FOS, said: “Too often we find that consumer interests are not embedded in financial services. The behavior that we have seen from some companies is just not good enough.
But the FOS stressed that the increase was not attributed solely to Wonga, who was brought to her knees last August by an increase in disputes over excessive charges. Some of its historic loans carried interest rates in excess of 5,000%.
The FOS annual report did not break down complaints about individual companies for the period. But figures released separately by the FOS that covered the 2018 calendar year showed that CashEuroNet, which owns brands such as QuickQuid, Pounds to Pocket and On Stride, received the highest number of complaints with 10,409, compared to 6,876. for Wonga.
Loans are offered to customers who might not be able to repay. Some already have 10 to 15 payday loans that they are struggling to repay, and in some cases, the FOS has dealt with clients who had more than 100 payday loans at a time.
Wayman said, “The increase in payday complaints is not just attributable to one lender. We’re concerned that various companies are failing in their duty to assess debt affordability and not learning enough from the complaints we’ve resolved – and we’re hearing more and more from customers to wrestle with debt. unsustainable.
The increase in complaints comes despite a cap on payday loan fees imposed by the Financial Conduct Authority, which went into effect in 2015 and prevented lenders from charging clients more fees and interest than the amount borrowed.
Peter Tutton, policy manager at debt charity StepChange, said he had also seen a “small but worrying resurgence of customers with payday loans or the like,” with younger customers starting to take on debt as a result. result.
“People often turn to this type of loan when they feel there is no alternative. Public policies must support better alternatives and adaptation strategies, ”he added. StepChange lobbied for options including an interest-free loan program, which is currently being assessed by the Treasury.
The FOS annual report also found a 40% increase in fraud and scam complaints to 12,000, with authorized push payments being one of the fastest growing issues. Complaints about computer failures increased 8% to 150,000.
Most complained about complaints about financial products in the year up to March 2019
1.IPP: 180 507
2. Current accounts: 41,069
3. Payday loans: 39,715
4. Credit cards: 13,940
5. Automobile insurance: 12,977
6. Mortgages: 10,087
7. Rent-to-own: 8 943
8. Unsecured loans: 6,806
9. Building insurance: 6,723
10. Installment loans: 5,162
