New figures published by the Financial Ombudsman Service (FoS) today reveal that the number of complaints about payday loan companies soared by 178% in the year to March.
Payment Protection Insurance (PPI) remains the most complained about issue, but payday lenders received 3,216 complaints in 2015/16, compared to 1,157 the year before.
As this comes very soon after the main payday lending firms received re-authorisation from the Financial Conduct Authority (FCA) it will raise the question of whether the industry as a whole can ever be trusted.
This is particularly the case since the type of complaints reported are reminiscent of previous controversies within the industry: affordability assessments, bad practice with those in debt distress and the misuse of the continuous payment authority by lenders to retrieve money owed.
Carl Packman, Research and Good Practice Manager at Toynbee Hall, responded to the news saying:
“Today’s news will come as a disappointment to those hoping payday lenders had cleaned up their act since the recent introduction of major regulatory changes. Given by how much complaints increased it is hard to believe it is down to just a few bad apples, particularly after considerable market consolidation.
“But we welcome the fact people feel confident enough to raise complaints. We also remain hopeful that there is appetite within the payday loans industry to eventually bring about demonstrable business model reform for the benefit of consumers. We know this won’t happen overnight.
“We would be particularly interested in seeing evidence for how payday lenders are helping customers who become financially distressed – something many lenders have already committed to. Putting in place stronger measures of intervention for stressed customers such as more proactive advice signposting or information for self-help at the application stage would avoid the problems heard about today.
“We would also like to see the industry better define its customer base. If they are now an alternative lender for prime or near-prime customers they need to communicate their parameters.”