Complaints about payday loans continue to rise
Despite new regulations brought in to limit interest charges, there has been a sharp rise in complaints about payday loans for the second consecutive year.
During the 2016-17 financial year, the Financial Ombudsman Service (FOS) received more than 10,000 new complaints related to short-term credit products; a sharp rise from the 3,126 received the previous year.
This comes as part of wider concerns held by consumers, with regulators becoming increasingly worried themselves.
The Bank of England and the Financial Conduct Authority (FCA) have both issued warnings over the acceleration of consumer borrowing, including car finance, credit card debt and loans.
There is already an ongoing inquiry being conducted by the FCA, with them looking into door-to-door lending, overdrafts and other forms of loan. There has also been campaigning from consumer groups to introduce some form of overdraft cap.
The figures provided by the FOS show that the total number of complaints regarding payday loans was nine times higher than it had been two years ago.
Since the beginning of 2015, rates on payday loans have been capped at 0.8 per cent of the amount borrowed per day, and no-one will be required to pay back double the amount borrowed.
Caroline Wayman, the chief financial ombudsman, said that the rise in consumer awareness as to their right to complain may have contributed to this rise in complaints.
The complaints have largely centred around high costs and interest rates, many being taken without permission and negative impacts on credit ratings in spite of claims that ratings would be improved or unaffected.
“The most striking story this year has been the rise in complaints we have seen from people having trouble with credit,” said Ms Wayman.
“It is clear that financial difficulties and financial exclusion remain significant challenges for many people. The important thing is to speak up if you’re struggling. Money is often very complicated – and our job is to unravel what’s happened and find a fair way to put things right by looking at individual complaints.”