The United Kingdom has been intensely clamping down on the payday loan industry for a couple of years now. Everything from reforming the way the industry operates to changing the way they seek government approval, the financial alternative has really been given a makeover in Britain.
With the crackdown, one would conclude that everything would be fine in the payday loan industry. Nope. According to a report, consumers are still experiencing troubles in this sector.
According to a new annual review report covering the 2015-2016 financial year, the Financial Ombudsman Service says complaints about payday loans have nearly tripled in the past year, even with rigorous regulations for the often chastised industry. The number of payday loan complaints rose 178 percent, from 1,157 to 3,216.
But the ombudsman isn’t really displeased with the numbers. In fact, this is a good thing, the report suggests, because it shows that consumers are beginning to be aware “of their rights when things go wrong.” Since the Financial Conduct Authority (FCA) has reined in the industry’s alleged unfair practices, which gained a lot of publicity, consumers are a lot more heightened to what is right and what is wrong.
The FCA officially came down on the payday loan industry in April 2014 with new rules and regulations. They consisted of capping interest rates and default charges, limiting payday loan advertisements, preventing customers with existing payday loans from taking out additional loans and mandating affordability checks on the part of payday loan stores.
The number of complaints may wane in the few years. The FCA notes that the number of loans from payday lenders has fallen from 6.3 million (2013) to 1.8 million (2015). Some wonder if the payday loan industry could ever really be trusted to operate on its own, given the number of complaints made even with additional regulations.
“Given by how much complaints increased it is hard to believe it is down to just a few bad apples, particularly after considerable market consolidation. But we welcome the fact people feel confident enough to raise complaints,’ said Carl Packman, research and good practice manager at anti-poverty charity Toynbee Hall, in an interview with the Daily Mail.
“Putting in place stronger measures of intervention for stressed customers such as more proactive advice signposting or information for self-help at the application stage would avoid the problems heard about today.”
Overall, the ombudsman received a total of 340,899 complaints regarding all financial products and services. This is up 3.5 percent from the previous year.
Some of the other complaints the ombudsman received were about payment protection insurance (PPI), which generated 188,700 complaints. Consumers are also griping about fee-charging packaged current accounts, which produces about 120 complaints per day. Here are some other common complaints submitted by consumers to the ombudsman:
- Hire purchase (3,072)
- Point-of-sale loans (2,071)
- Catalogue shopping (939)
- Debt collecting (707)
- Credit Broking (563)
In the end, the ombudsman service says, solving the issues today will result in preventing further problems from happening in the future.