3 in 4 payday loans could have cause for complaint to the Ombudsman
Citizens Advice urges payday loan customers to fight back against unscrupulous lenders
Three in four payday borrowers who got advice from the Citizens Advice consumer service had been treated unfairly by their lender and could have grounds for an official complaint to the Financial Ombudsman Service, says the national charity.
Citizens Advice’s in depth analysis of 665 payday loan cases, reported to its consumer service between 1 January and 30 June 2013, finds that at least 76% could have grounds for an official complaint to the Financial Ombudsman including:
- 1 in 5 were possible cases of fraud – where a person was chased for a loan they hadn’t taken out.
- More than a third involved issues with continuous payment authorities including money that was not authorised to be taken.
- 12% involved harassment whereby lenders pester people with phone calls and text messages rather than accept affordable repayment offers.
- 1 in 10 were about lenders’ unfair treatment of people in financial difficulties.
Latest figures from the Citizens Advice payday loan tracker reveals that 4 out of 5 were not told by their lender how to complain if there is a problem.
Today (Monday 5 August) Citizens Advice launches a month-long campaign urging payday loan customers not to let predatory lenders get away with treating them unfairly.
Consumers who are finding it difficult to raise their payday loan problem with their lender can contact the Financial Ombudsman who will help them through the complaint process. There were 160 complaints made to the Financial Ombudsman between April and June this year about payday loans, with 72% upheld in favour of the consumer.
If a complaint is upheld by the Financial Ombudsman – and the consumer has lost out as a result – the lender can be ordered to put things right. Consumers could get a refund on loan repayments, interest or default charges or compensation for any inconvenience caused.
Citizens Advice payday loan tracker also found that 71% of payday loan customers felt they were put under pressure to rollover their loan and 3 in 4 people had repayment problems.
Citizens Advice Chief Executive Gillian Guy said:
“The level of debt and hardship caused by some payday loans is absolutely scandalous and people often feel completely powerless to do anything about it. But consumers can fight back. If you are struggling to pay back the loan Citizens Advice can help you sort out a reasonable repayment plan and if you make a successful complaint to the Financial Ombudsman service you could find you get a refund for an unauthorised payment or compensation for unfair treatment.
“By making your voice heard you will expose the bad behaviour of lenders and put pressure on them to clean up their act which could help stop similar problems happening to other people.”
As part of the campaign Citizens Advice has launched a new online animation to help people get on top of their payday loan problems. It explains that payday lenders aren’t allowed to take money from your bank account without you knowing, nor should they put pressure on to borrow more money or contact you at all hours of the day. Citizens Advice is also taking to Twitter with the hashtag #paydaywatch as bureaux from across the country tweet about payday loan cases they are helping with.
In May, evidence from Citizens Advice revealed that payday lenders are breaking 12 out of 14 promises they made to treat customers fairly. Earlier this year the OFT reported in its payday lending compliance review that 38 of the 50 lenders it inspected failed to comply with at least one of the complaint handling rules of the Financial Ombudsman Service.
Advice tips if you're struggling to repay a payday loan:
- Your payday lender should accept a repayment offer which is reasonable.
- Don't be pressurised to extend your loan – it will cost you more.
- It’s not ok for your lender to ring you during the night or more than once a day chasing you for money, or to contact your employer.
- You should be able to get in contact with your payday lender.
- If you are having these problems you can do something about it.
- Make a complaint by filling in our simple checklist at www.adviceguide.org.uk.
- Get advice from adviceguide.org.uk, from the Citizens Advice consumer service (08454 04 05 06 or 08454 04 05 05 for Welsh language line) or your local bureau.
- Make a complaint about a payday loan direct to the Financial Ombudsman Service consumer helpline on 0300 123 9 123 or 0800 023 4567 or via email firstname.lastname@example.org.
Advice tips if you are in financial difficulty and considering a payday loan:
- Get help with your money troubles. Your local Citizens Advice can provide debt advice and help you sort out your finances. By making a few changes you may be able to avoid taking out a short-term loan.
- It is important to consider all the other options available to you before taking out a payday loan as they are expensive and could make your money problems worse.
- Pay day loans can be a costly way to deal with short term financial problems and are not suitable for long term money troubles.
- A loan from a credit union is more affordable – check if there's a credit union in your area.
- If you have a bank account, you may be able to agree an overdraft. But be careful of going overdrawn without permission and make sure you understand any fees and charges.
- If you are thinking about taking out a payday loan to pay off other debts, don't. Instead, speak to the companies you owe money to and agree a repayment plan. You can get help with debts from www.adviceguide.org.uk or your local Citizens Advice Bureau.
Notes to editors
How to make a complaint
Step 1 - write to your lender
- The first thing to do is contact your lender and try to sort things out with them. You'll need to do this before taking the complaint further.
- In your complaint, list all the ways in which you think your lender hasn’t followed its commitments laid out in the industry Good Practice Charter.
- Work out what you want your lender to do about your problem and include this in your complaint. If you want to come to a repayment agreement, work out how much you can afford to pay and how often.
- The lender must acknowledge your complaint within five days of receiving it. If they decide to investigate the complaint further, they should tell you and keep you regularly updated.
- You can download a template letter from Citizens Advice to help you write your letter of complaint
Step 2 - Complain to the Financial Ombudsman Service (FOS)
- You must give your lender eight weeks to respond or to sort the problem out. If you're not happy after this, you can complain to the Financial Ombudsman Service. If your complaint is upheld, this may result in some compensation.
- The FOS will look at your complaint and advise you how it could be sorted out. If you don't get the result you want, the FOS will start a formal investigation. The final decision given at the end of this investigation is binding on your lender. However, if you don't agree with it, you can take your lender to court.
- There is a time limit for making the complaint. This is six months from when you get a final decision from your lender about how it is going to deal with your complaint. If you haven't had a response from them at all, the deadline is six months from the end of the eight week period.
- To make a complaint to the FOS, you can download a complaint form from their website at: www.financial-ombudsman.org.uk
- Citizens Advice carried out an in depth analysis of 665 payday loan cases reported to its consumer service between 1 January and 30 June 2013 by consumers from England, Scotland and Wales.
- Citizens Advice analysed customer feedback on 2,718 payday loans from 126 different payday lenders. Feedback was provided between 26 November and 21 July 2013 through an online survey, questionnaires in bureaux and face to face surveys on high streets. The study was promoted widely through national media and other organisations including Nationwide, Which?, Toynbee Hall and other debt charities. The tracker monitors whether lenders are abiding by their own customer charter.
- The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see www.citizensadvice.org.uk
- The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality. For online advice and information see www.adviceguide.org.uk
- Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.9 million problems from April 2011 to March 2012. For full 2011/2012 service statistics see our quarterly publication Advice trends
- Out of 22 national charities, the Citizens Advice service is ranked by the general public as being the most helpful, approachable, professional, informative, effective / cost effective, reputable and accountable (nfpSynergy’s Brand Attributes survey, May 2010).
- Most Citizens Advice service staff are trained volunteers, working at around 3,500 service outlets across England and Wales.