Complaints to the financial ombudsman over payday loans have risen to nearly 200 a week – and not all struggling people necessarily fit the picture of low-income borrowers who rely on short-term loans for s ‘get out.
During the second half of 2016, the Financial mediation service received 5,095 new payday loan complaints, up 22% from the first six months of the year. The increase came despite tighter regulation of the controversial sector.
The numbers mean loan complaints now stand at around 850 per month. At the start of 2013, the mediator was receiving around 30 to 40 cases each month. Most complaints relate to affordability – for example, a borrower claiming that the checks the company should have carried out were not carried out properly.
The ombudsman also revealed that those complaining about payday lenders included teachers, nurses, students and “even a handful of vets”, showing that this was an issue that affected people from ” all walks of life ”.
The increase follows a regulatory crackdown on the multibillion-pound industry, which the Financial conduct authority (FCA) began to insure the policy in April 2014. Since then, payday lenders have been required to make more stringent affordability checks and their ads are subject to further scrutiny, and in January 2015 price caps on loans took effect, resulting in lower borrowing costs for many.
The Ombudsman previously said the increase in payday loan complaints partly reflects people’s growing awareness of their rights when things go wrong.
Examining all financial complaints, the Ombudsman handled 149,864 new cases in the last six months of 2016, 11% less than the first semester.
Payment protection insurance continues to be the most criticized product, with just over 78,000 complaints, more than half of the total. However, the roughly 3,000 PPI complaints the mediation service typically receives in a week are down from a high of 12,000.
Bank of Scotland, which includes brands such as Halifax and Birmingham Midshires, was the most criticized company during the period with 19,555 complaints. Lloyds and Barclays were second and third with 18,411 and 13,379 complaints, respectively.
The average “retention rate” over the six-month period, when the mediator ruled in favor of the consumer, was 42%. Coventry building society had the lowest retention rate at 6%, while HFC Bank, a subsidiary of HSBC, had the highest at 87%.