Thousands ‘misled’ by payday loan middlemen

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Complaints about “payday loan middlemen” websites that charge hundreds of pounds on the promise of finding cheap credit have more than doubled in the last year.

More than 10,000 people have contacted the ombudsman so far this year to complain about credit broking websites - more than twice the number for the whole of 2013, the Financial Ombudsman Service (FOS) said.

Many people who had turned to such websites felt “misled” as they thought they were applying for a loan directly or did not realise they would be charged, the service said.

Some complained that they were struggling financially after middlemen drained money from their accounts, without providing them with the loan they were looking for, and others had their bank accounts debited multiple times without warning.

In two-thirds of complaints the service investigated, the ombudsman agreed that the consumer had been treated unfairly.

Senior ombudsman Juliana Francis said: “It’s disappointing that people who are already struggling to make ends meet are being misled into thinking that these websites will get them a loan.

“In too many of the cases we sort out, no loan is provided and people’s bank accounts have been charged a high fee, often multiple times.”

StepChange Debt Charity head of policy Peter Tutton said: “This is a well-known problem, but it continues to get worse. The time has come for government and the regulator to ban credit brokers from charging up-front fees.”

l An advert for a loan company that encouraged “frivolous” spending of borrowed money on a Caribbean holiday has been banned.

The television ad for Borro.com’s 69% APR loans featured a couple talking about how the money could do “so many amazing things” such as “help start a business, pay school fees” or “fly us to the Caribbean”.

Banning the ad, the Advertising Standards Authority (ASA) said it was “irresponsible” and that marketers should take care to advertise those products responsibly.