Business

Payday borrowers 'could complain about lenders'

Loans sign
Image caption Payday lenders have faced criticism, although a code of conduct is in place

A host of payday loan customers have grounds for complaint against lenders over the way repayments were collected, a charity has said.

Citizens Advice said it saw 665 cases, of which 76% could have been forwarded to the Financial Ombudsman Service.

These included cases of individuals being chased for a loan they had not taken out, it said.

A string of payday lenders have signed up to a code of conduct aimed at improving standards.

'Pestered with texts'

Citizens Advice analysed a series of payday loan cases, which were reported to its customer helpline in the first half of the year.

It found potential cases of fraud, such as being chased for non-existent loans. Others were "pestered" with phone calls and text messages, despite offers of repayments plans from customers.

Some in financial difficulty were treated unfairly, according to the charity, and so could have taken a complaint to the ombudsman.

The Financial Ombudsman Service could investigate cases and make a ruling.

If wrongdoing is discovered, the ombudsman would outline how the customers should be put back into the situation they would have been in, assuming the wrongdoing had not taken place.

"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," said Gillian Guy, chief executive of Citizens Advice.

Refund

The industry's trade bodies have put codes of conduct in place to ensure that customers are treated fairly, while regulators have the power to withdraw credit licences from the worst offenders.

Russell Hamblin-Boone, chief executive of the Consumer Finance Association (CFA), said: "We encourage customers of CFA members to make direct contact with their lender if they feel that they have been treated unfairly or to arrange a payment plan to help them through a difficult financial period."

The association said that, in two areas initially, it had set up a hotline between Citizens Advice staff and the hardship teams in payday lender businesses, in order to solve debt problems quickly.

Some 15 businesses have left the payday lending market after warnings to the industry from the regulator, the Office of Fair Trading (OFT).

The OFT will be replaced as the regulator of payday lenders by the City watchdog, the Financial Conduct Authority, next year.

"The new regulator in 2014 will have strong powers to clean up the industry, such as banning products imposing unlimited fines and ordering firms to give consumers their money back," said Jo Swinson, the consumer minister.

"Payday lenders are on notice - if they don't take action to fix their problems they will face further complaints and further sanctions."

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