Figures released by the Citizens Advice consumer service this month state that 76% of people that have contacted them about an issue with their payday loan over the first half of this year (665 cases) have grounds to make an official complaint to the Financial Ombudsman.
One of the most common reasons for dissatisfaction amongst payday loan customers is that some lenders have been allegedly taking money from accounts of the customers that was not authorised to be taken. If the customer was unaware that money was due to be taken then it can cause unwanted overdraft problems and penalty charges from their bank.
Perhaps the reasons that are of most concern are harassment and fraud. Harassment was cited as the reason for contacting Citizens Advice in 12% of cases with customers claiming that they were pestered and harassed for payment by phone and text. There was also an alarmingly high level of fraud reported – some 20% of complaints concerned people contacting Citizens Advice stating that they were being pursued for payments from lenders when they didn’t take out a payday loan at any time.
One of the benefits of payday loans is the ease with which an applicant is able to become accepted for a loan in an emergency. However, this should not be to the detriment of proper checks and balances which would appear to be the case in some instances.
Payday loans do fill a gap in the market and are popular forms of credit, chiefly among people that have bad credit and as a consequence are overlooked by banks and other lenders, so there is a place in society for these types of loans. With any young industry there will be a land grab initially where companies will try to grow as fast as possible in order to leverage economies of scale. Perhaps this is happening in the payday loans market whereby companies can see how lucrative the market is at the moment due to being stuck in a recessionary economy and in their attempts at fast growth some payday loan company standards are slipping.
The level of complaints to Citizens Advice is particularly unedifying for companies that are perpetually having to justify their existence so there needs to be a collaborative effort between the payday loans companies themselves to ensure that lending criteria and service is at a high quality level, and governmental regulation that is swift and up to the job to protect payday loans customers should they receive less than satisfactory service levels.