The PAYDAY loan and other short-term lenders always charge borrowers DOUBLE the amount loaned in interest and fees.
In January 2015, the city’s supervisory authority, the Financial Conduct Authority (FCA), put a cap on the amount high-cost credit companies could charge.
Under its rules, borrowers never have to repay more than double what they originally borrowed.
But four years later and one Mail on Sunday investigation reveals that many lenders still charge borrowers the maximum – or near the maximum – allowed.
LoanPig borrowers, for example, will repay the whopping £ 2,000 on a £ 1,000 loan taken out over six months.
While Lendingstream, Sunny, PiggyBank, Mr Lender and Satsuma all charge close to the £ 1,000 maximum allowed on a £ 1,000 loan.
The report also found that some lenders, such as Lendingstream and Sunny, do not provide online tools to give borrowers an exact indication of how much they will be charged before applying.
It comes like complaints against payday lenders soared 130% in 2018, according to the Financial Ombudsman Service.
The complaints body received nearly 40,000 new complaints about short-term lenders last year, up from 17,000 in 2017.
He told the Mail on Sunday: “From the number of complaints we have received, it appears the system is not working.”
The Sun has contacted the Financial Ombudsman Service and we’ll update this story if we get a response.
Debt charity StepChange added that there were still problems with short-term loans, despite FCA regulations.
Richard Lane, director of external affairs at StepChange, told The Sun: “Despite the regulator’s interventions in the payday lending market, the evidence suggests that there are still problems with short-term, high-cost credit.
“In 2018, just under a fifth of all new StepChange customers reported having this type of loan, with an average debt of £ 1,755. Among young people, the proportion is higher.
“The 130% annual increase in complaints recently reported by the Financial Mediation Service against payday lenders reinforces the fact that in practice there are still problems. “
How to request a refund from payday lenders
YOU can claim compensation from a payday lender if the loan was unaffordable, even if you have finished paying it off.
If you believe you are entitled to compensation, you should follow these DebtCamel steps to find out how to make a claim.
1. Check if you sold the loan incorrectly
Before a lender gives you a loan, they must check whether you are able to repay it.
For a payday loan to be affordable, you need to be able to pay it off the next month as well as pay off your other bills and debts.
The loan was unaffordable if:
- you often renewed loans or borrowed again soon after repaying a loan;
- your loans from a lender were increasing in size;
- some reimbursements were late; Where
- the loan was a big part of your income.
Ask the lender for a copy of your loan details, such as when you took out it and how much interest you paid.
Compare it to your bank statements from the time you took it out and see if you could have paid off the loan after paying your bills.
2. Make a complaint
There are websites that will help you submit your complaint to the lender, but be aware that if you are successful, they will take part of your compensation.
DebtHacker.co.uk is a completely free tool that will help you in the same process.
If you prefer to do it yourself, you should write a letter or email citing “unaffordable loans” and request a full refund of the interest and fees you paid, plus the 8% interest on the loan. ombudsman in addition.
Also request that the loan be removed from your credit report.
You can complain even if the lender has gone into receivership.
3. Contact the Mediator
If you have not heard from them after eight weeks, you should bring the matter to the Financial mediator.
You should also contact them if your complaint is dismissed, the repayment is too low, or if they refuse to consider loans that are over six years old and have been sold to a debt collector.
But be aware that you usually can’t complain to the ombudsman when the business has been foreclosed.
An FCA spokesperson told us, “Since FCA took over the regulation of consumer credit five years ago, we have used many approaches to ensure consumer protection and raise standards.
“This has included policy interventions, such as a cap on payday lending and extensive corporate oversight, which has led to a significant shift in the affordability ratings of many businesses, as well as in their business practices. abstention and recovery.
“As a result of our investigations since 2014, we have secured more than £ 900million in reparations for customers. We recently wrote to high-cost short-term credit companies reminding them of their obligations.”
The high-cost credit trade organization, the Consumer Finance Association, says the high interest rates reflect the cost of these loans and adds that these providers offer a service that banks cannot.
A spokesperson said: “The price is based on recovering all costs over a short period of time and also reflects the risk a lender takes that a retail bank is unwilling to take.
“The average short-term loan is around £ 300 paid off over a short period, which is a financial lifeline for hundreds of thousands of customers. “
The Sun has contacted all of the lenders mentioned in this article and we’ll update this story if we get a response. At the time of writing, Amigo, CashFloat, LoanPig, Mr Lender, PiggyBank and Sunny had responded.
Amigo Loans made no comment, only telling The Sun that as a medium term rather than short term lender it should not have been included in the Daily’s Mail research.
A spokesperson for CashFloat said it allows users to pay off sooner without penalty and does not charge any fees. He adds that he offers lower interest rates to those who have repaid previous loans.
Meanwhile, a LoanPig spokesperson said: “We are not predatory, and we do not disguise the costs involved in providing short-term loans to customers who have been spared by their own bank.
“At LoanPig.co.uk we manually assess each loan offered, making sure the client knows all the facts about the loan and can afford the repayments.”
Mr. Lender points out that he lends to less than 3 percent of applicants and says he never lends when the repayment exceeds more than 40 percent of the borrower’s disposable income.
He adds that he doesn’t charge any fees – just the daily interest.
Dan Ware, Managing Director of PiggyBank, commented: “We reject, on average, over 75% of the applications we receive. Our company policy is to offer the best solution for our customers, not necessarily the best result for the company.
“We also allow our clients to prepay their loans at no additional cost, which saves them on the amount of interest they pay. “
Scott Greever, managing director of Elevate Credit, which provides Sunny loans, added: “Sunny was founded in 2013 for people who can’t get credit from traditional providers like banks, and was built on principles which have since become mandatory for the sector.
“Sunny has never charged a late repayment fee, we encourage customers to repay earlier to reduce interest, and we have a 20% cap on operating profits.
“If a client is having trouble repaying their loan, we encourage them to contact us so that we can help them.”
Our Stop the credit scam campaign also saw the FCA crack down on “exceptionally high” option-to-buy rental products, as well as make a series of overdraft changes and introduce tougher rules for home lenders.
A standard 5.4 million high-cost loans were taken out during the fiscal year ended in June 2018, according to the FCA, up from 4.6 million during the same period the previous year.
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