Greg Wright: How one customer built up 137 consecutive payday loans
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For years, I have campaigned for greater scrutiny of any firms who place profits before customers’ wellbeing. I’ve raised concerns when an increase was reported in the number of complaints against short-term lenders. Jason Wassell, the chief executive of the Consumer Finance Association, a body which represents the interests of short-term lenders, offered an alternative view. He acknowledged that the number of complaints against payday loans firms have risen in recent years. However, Mr Wassell said: “First, many of these complaints date back several years. The peak of the payday market was back in 2012 through to 2014, and that is where these come from. Second, we have become the target of claims management companies. Nearly nine in 10 complaints to firms are generated by these companies, most of which are automatically escalated to the Financial Ombudsman Service as they can do so at no cost to the CMC.“What is more worrying is that the Financial Conduct Authority, the new regulator of claims management companies, has already raised concerns about the abuse of data and talked about fraudulent claims. We will see whether that sector reforms its practices.“In the meantime, it is clear that there is a demand for consumer credit that can help people live their lives. Whilst we protect those that need our support, and should always be ready to offer forbearance, we also need to ensure we do not reduce access to credit.”These comments have prompted a fierce response from Jemma Marshall, the managing director of Allegiant Finance Services, who takes issue with the suggestion that claims against payday loan lenders, often brought via claims management companies, are jeopardising the public’s access to short-term credit in the future. Ms Marshall said: “In suggesting this, what Mr Wassell misses is that payday loan complaints do not relate to an allegation that payday loans are bad per se.“Payday loan claims focus on the repeated lending of payday loans to people who cannot afford to repay them – resulting in a month-on-month borrowing trap where a customer has to reborrow just to make ends meet.”She added: “Just this week we have seen a customer who had an astonishing consecutive 137 payday loans. One may have hoped that the lender at some point would have realised that the customer had become trapped in a short-term lending cycle, but doubtless they were too fixated on their £20,000 plus profit from lending this financially vulnerable customer no more than £700 a time.“While this is an extreme example, our customers on average see refunds of £1400 for fees paid to payday loan lenders. The problem is widescale.“Secondly, within his article Mr Wassell sought to characterise payday loan claims as relating to historic misdemeanours. Whilst it is true that regulation has tightened around payday lending following the Financial Conduct Authority taking over its regulation in 2015, in our experience, unaffordable lending still persists. “Herein lies my greatest issue with Mr Wassell’s article. It becries short-term lenders as well-meaning businesses who are innocent victims of claims management companies inundating them with claims relating to wrongs from many years ago which have long since been rectified.“This is simply incorrect. It is simply fantasy for the payday loan lenders to blame CMCs for the volume of claims they now face. Behind every successful claim there is a customer who was no doubt financially vulnerable, and for whom the payday loan lender simply made the situation worse.”I hold no brief for claims management firms. Consumers can bring successful claims on their own. But you cannot escape this fundamental point; these firms do not invent laws. They identify mis-selling issues and promote compensation claims. If the payday loans firms had behaved impeccably, all these claims would fail. A dash of humility from payday lenders would not be out of place.