Payday Loan Complaints

The new regulations include:
- Daily cap of 0.8%
- Max. late payment fee of £1
- Loan cap of 100% of amount borrowed
In the last few years, payday loan companies have had to alter the way they operate to abide by new regulations imposed by the Financial Conduct Authority (FCA). The new regulations aimed to decrease the amount of irresponsible lending that happened on a daily basis and protect consumers from borrowing more than they could afford to repay. Yet, despite these new regulations, the number of complaints made against payday loan companies has increased massively. Whether it’s because more people are using payday loans, or simply that more people are aware of how to complain, complaints are up and so being the number of complaints upheld.

There are several reasons a consumer might make a complaint about payday lending. They can vary from not being subject to adequate affordability checks, to not considering a customer’s change in circumstances during the loan period. While the discretion to lend is with the lender, there is some responsibility of the borrower to provide correct and honest information throughout the lending process, and to update their lender with any financial changes they may experience. Contrary to popular belief, most lenders want to help you repay your loan and really aren’t as intimidating as you might think.

However, there are circumstances wherein a complaint might be necessary: it is possible that a lender might lend unsuitably or not take the appropriate action required when advised of changes to a consumer’s finances or wellbeing. If these issues arise, knowing how to make a complaint is very important.

It can be tempting to get a third-party complaints management company involved; they seem attractive because they will file the complaint and oversee the proceedings but unfortunately, they also require a commission. As the complaint process is not a difficult one, this commission may be unnecessary – especially if a customer is struggling with multiple debts, as paying a third-party will only add to this debt and reduce the benefit of any refunds that may be awarded.

Case Study: A customer has 5 different payday loans which they have complained against using a complaints management company. Three of these companies have awarded a refund of £75 each, and the other two have reduced the interest so the customer only needs to repay the loan principal (this is the amount borrowed) which sums to £200. In total, the customer has received £225 in refunds which they decide to use to settle the £200 debt from the other two payday loans. This leaves the customer with £25 spare. However, because they used a claims management company (who charges 30% plus VAT per successful claim*), the customer owes the company £81. This means the customer is still out of pocket as the refund awards are not enough to cover the £200 repayments to the two loan companies, and the claims management company.
*charges and fees may vary

Complaints companies require payment for their service and will need access to personal and financial information. Furthermore, a complaint against a payday loan company requires certain evidence to back up claims about unaffordability, for example, and this evidence can include bank statements, proof of employment/unemployment – data that may be considered sensitive and information a customer may want to share with as few people as possible.

Another reason not to use a third-party complaints company is that it’s easy to complain directly to a lender about their lending practice – it’s a part of every business so they will know how to deal with the complaint and they most likely have a dedicated team who will handle and resolve the complaint in a manner that is satisfactory to both parties. If the outcome of the complaint is, however, unsatisfactory, it can then be referred directly to the Financial Ombudsman who will investigate the complaint further.

The timeframe for complaints is a long one: companies have eight weeks to respond to a complaint, and if the complaint is then taken to the Financial Ombudsman, an answer may not be reached for another six months. For this reason, it is important that all the facts and evidence are collated prior to making the complaint, and that they are reflective of the loans that were taken out, otherwise the complaint may take even longer to process.

Most lenders will have a specific line of contact to deal with complaints and this can normally be found on the contact page on their website. If you can’t find the complaints email address or contact telephone number, they should able to provide you with the correct details if you get in touch via their normal line of contact. All of the direct lenders listed on Clear And Fair Loan Comparison are focused on providing the best customer service and will always want to hear directly from you if you are unhappy with any part of their service.