Over the past couple of years, the amount of payday loan complaints has doubled according to the Ombudsman.
The watchdog has warned that this is just the tip of the iceberg. Now borrowers are being urged to seek help if they are having trouble with their payday loan.
There is so much help available these days and out of one of three complaints, the Ombudsman has ruled in the borrowers favour.
Figures don’t represent the depth of the problem
It is bad enough that the number of people finding themselves in trouble has doubled over the past year. However, what’s more worrying is the fact that not everybody is making a complaint.
There are actually a lot more borrowers who are struggling with their payday loans, but they just don’t know where to turn. Many people are put off making a complaint because they feel they won’t get anywhere. So as shocking as the statistics are, they still aren’t showing a true representation of the state of the industry.
As reported by This is Money, 63% of cases that were solved by the Ombudsman were ruled in the borrowers favour.
There were a total of 5,395 enquiries made in 2013, yet a staggering 66,557 people contacted the debt organisation StepChange for help. All in all the company dealt with £110 million pounds worth of payday loan debt.
The worry is that people who are struggling to repay their payday loan debts feel powerless to do anything. Therefore they aren’t making that important step and filing a complaint.
The complaints received by the Ombudsman vary and one of the most common problems seen is that people are being chased for debts that they didn’t take out in the first place.
If you have a payday lender chasing you for a loan that you never took out, you could be victim to identity fraud. Fraudsters take out a loan in another person’s name and rack up potentially thousands of pounds worth of debt.
Other complaints regard poor customer service and problems with admin. Some lenders are simply unwilling to help a customer when they do fall into difficulties repaying.
Rather than offering support, they place pressure onto the borrower to repay the money that’s owed; often adding on various interest charges as they do so. Some even resort to aggressive debt collection methods to try to get their money back.
If you are being pursued by a pushy and aggressive lender, there are things you can do. The ombudsman is there to help and the lender may be breaking the law in the way they are handling the situation.
Changes in advertisement laws
One other complaint that has been received over the past year relates to payday lending advertising. Frequently advertisements are being shown in between children’s programs. This is sending out a message to children that payday lending is a common, acceptable thing to do.
Wonga.com is one of the leading payday lenders in the UK and they have recently axed their lovable puppets due to the complaints in lender advertising. The company has openly stated that they don’t want to be associated with anything that will attract children to lending.
Getting rid of the puppets is just one thing the company is doing to change its ways. It will also stop screening adverts during children’s viewing times despite the fact it could lose them money.
Wonga has claimed that it is now looking into becoming more customer focused. It is even willing to become a less profitable business in order to achieve its goals of lending to relevant, reliable individuals.
Some of the changes they will be making include:
• Tightening up lending criteria
• Working closely with industry regulators
• Improving affordability for customers
• Looking into the complete cost of borrowing for customers
Payday loans have helped thousands of people to overcome short term financial problems, but there are far more borrowers who are getting into serious financial trouble because of them. If you or somebody you know is having problems with payday loans, the Ombudsman can help.
Have you had a bad experience with a payday loan company? Would you be willing to make a complaint? Let us know, we’d love to hear from you.
Francesca Lewis is a personal finance blogger. She has 10 years’ experience a debt expert and financial advisor.