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Underhand tactics could be costing personal loan consumers £400m


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Underhand tactics within the personal loans industry are costing customers as much as £400m every year, according to TSB.

The bank’s Consumers Matter report found that customers are being punished for shopping around, providers are hiding important product features and customers feel trapped with their loan provider.

TSB also highlighted that 61% of lenders performed unnecessary hard credit checks when a customer looking for a personal loan just asks for a price or rate, while almost 80% of respondents said personal loan fees and charges should be clearer.

Nearly seven in 10 (69%) wanted the switching of a loan to get a better deal to be made simple and straightforward.

“I was genuinely shocked and amazed to discover the underhand tactics employed by loans providers,” said Paul Pester, chief executive officer for TSB.

“So much so, we just had to blow the lid off this broken market.

“For any market to operate well, consumers have to be able to shop around, understand what they’re buying and be able to switch providers easily.

“What other industry penalises you just for shopping around to try [to] get a better deal?”

TSB has identified three changes that will make the loans market work for consumers:

  1. Consumers must be able to shop around for a good deal – with loans providers never making a hard mark on a consumer’s credit file until they choose to actually purchase
  2. Providers must come clean on hidden product features upfront and be clear on how the loan works – to enable customers to find the right loan for their needs
  3. The industry must stop locking in customers and create a new switching service – to free customers who feel trapped with their current provider.

 

“We estimate that consumers are losing out by as much as £400m each year – £400m which is going straight into the pockets of aggressive loans providers,” Paul added.

“Enough is enough: it’s time the industry comes clean on these costly underhand tactics.”

TSB has calculated the cost of market behaviours on consumers based on the impact of both multiple credit searches and / or a failure to shop around on the level of interest a customer receives.





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