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FOS: Payday complaints rise by almost 50%

FOS: Payday complaints rise by almost 50%

In its fifteenth anniversary year of settling consumer complaints, The Financial Ombudsman Service (FOS) has revealed that complaints about payday loans rose by nearly half.

The FOS annual review has revealed an increase of 46 per cent in complaints about payday loans and a fourfold increase in the number of complaints about “packaged” bank accounts.

“Many people we spoke to felt that the short-term loans they had been offered were unaffordable,” the FOS noted.

“In some cases, the lender’s credit-scoring process was clearly inadequate,” it was added.

By the end of March this year, the FOS had received 1,157 complaints regarding payday loans, where at the same time last year complaints stood at 794.

However, the review stated that a fifth of all complaints received about payday loans this year were sorted out using its webchat service alone.

StepChange Debt Charity stated on its website that even with an FCA crackdown it must remain “vigilant” of new ways vulnerable people may be financially exploited.

“The payday lending industry has caused enormous damage in recent years,” said Chief Executive of StepChange Debt Charity, Mike O’Connor.

“We are hopeful that the Financial Conduct Authority (FCA) crackdown means that the sector can become part of a responsible credit market,” explained Mike.

“The answer to financial difficulties is rarely ever more borrowing, especially dangerous high-cost forms of credit like payday loans.  

“People struggling with debt need to be given breathing space, which includes protection from interest, charges and aggressive enforcement to help them regain a sound financial footing.”

Following the tightening of FCA rules in the payday sector, payday giant Wonga announced at the end of April that it had made an annual loss of £42.8 million after tax.

Commenting on Wonga’s results at the time, Executive Chairman Andy Haste said he had set out a six-point process to deliver essential change.

“We said Wonga would be smaller and less profitable in the near term as we focus on creating a sustainable business that lends responsibly and transparently to customers who can afford to borrow from us,” said Andy.

“We know it will take time to repair our reputation and gain an accepted place in the financial services industry, but we’re determined to deliver on our plans and serve our customers in the right way.”

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