Payday loan borrowers still being charged DOUBLE the amount lent
Payday and short-term lenders are also burying fees and interest rates
PAYDAY loan and other short-term lenders are still charging borrowers DOUBLE the amount lent in interest and fees.
Back in January 2015, city watchdog the Financial Conduct Authority (FCA) capped the amount high cost credit firms could charge.
Under its rules, borrowers never have to pay back more than double what they originally borrow.
But four years on and an investigation by the Mail on Sunday reveals that many lenders are still charging borrowers the maximum - or close to the maximum - allowed.
LoanPig borrowers, for example, will repay a whopping £2,000 on a £1,000 loan taken out over six months.
While Lendingstream, Sunny, PiggyBank, Mr Lender, and Satsuma all charge close to the maximum £1,000 allowed on a £1,000 loan.
The report also found that some lenders, such as Lendingstream and Sunny, don't provide online tools to give borrowers an indication of exactly how much they'll be charged before they apply.
It comes as complaints about payday lenders soared by a whopping 130 per cent in 2018, according to the Financial Ombudsman Service.
The complaints body received nearly 40,000 new complaints about short-term lenders last year - up from 17,000 in 2017.
It told The Mail on Sunday: "From the number of complaints we have received it seems the system is not working."
The Sun has contacted the Financial Ombudsman Service and we'll update this story if we get a response.
StepChange debt charity added that there are still issues with short term loans, despite FCA regulation.
Richard Lane, director of external affairs at StepChange told The Sun: “Despite the regulator’s interventions in the payday loan market, evidence suggests there are still issues surrounding short term, high cost credit.
"In 2018, just under one fifth of all new StepChange clients reported they had this type of loan, with an average debt of £1,755. Among young people the proportion is higher.
"The 130 per cent annual increase in complaints recently reported by the Financial Ombudsman service against payday lenders reinforces the fact that, in practice, there are still problems."
How to claim a refund from payday lenders
YOU can claim compensation from a payday lender if the loan was unaffordable, even if you've finished paying it off.
If you think you are owed compensation, then then you should follow these steps from DebtCamel on how to claim.
1. Check if you were mis-sold the loan
Before a lender gives you a loan, they have to check whether you are able to pay it back.
For a payday loan to be affordable, you had to be able to pay it back the following month as well as pay your other bills and debts.
The loan was unaffordable if:
- you often rolled loans or borrowed again soon after repaying a loan;
- your loans from a lender were increasing in size;
- some repayments were late; or
- the loan was a significant part of your income.
Ask the lender for a copy of your loan details, like when you took it out and how much interest you paid.
Compare it to your bank statements from the time you took it out and work out if you would have been able to pay back the loan after you paid your bills.
2. Make a complaint
There are websites that will help you submit your complaint to the lender but beware that if you're successful they will take a cut of your compensation.
DebtHacker.co.uk is a completely free tool that will help you with the same process.
If you'd prefer to do it yourself then you should write a letter or email citing citing "unaffordable loans" and ask for a full refund of the interest and charges you paid, plus the 8 per cent Ombudsman interest on top.
Also ask for the loan to be removed from your credit record.
You can find letter templates in DebtCamel, MoneySavingExpert and MoneyAdviceService - although some lenders will have their own reclaim tools set-up.
You can complain even if the lender has gone into administration.
3. Go to the Ombudsman
If you haven't heard anything back from them after eight weeks then you should take the issue to the Financial Ombudsman.
You should also contact them if your complaint is rejected, the refund is too low or they refuse to consider loans that are over six years old and have been sold to a debt collector.
But be aware that you can't usually complain to the Ombudsman where the firm has gone into administration.
An FCA spokesperson told us: “Since the FCA took over regulation of consumer credit five years ago, we have used many approaches to ensure consumers are protected and raise standards.
"This has included policy interventions, such as a cap on payday loans, and extensive supervision of firms, which has led to a significant change in many firms’ affordability assessments, along with their forbearance and collections practices.
"As a result of our investigations since 2014, we have secured over £900million in redress for customers. We have recently written to high cost short term credit firms to remind them about their obligations.”
High cost credit trade body, the Consumer Finance Association, says high interest rates reflects the cost of these loans and adds that these providers are offering a service that banks can't.
A spokesperson said: “The price is based upon recovering all costs over a short period and also reflects the risk a lender is taking that a high street bank is not willing to make.
“The average short-term loan is about £300 repaid over a short period which is a financial lifeline for hundreds of thousands of customers."
The Sun has reached out to all of the lenders mentioned in this article and we'll update this story if we get a response. At the time of writing, Amigo, CashFloat, LoanPig, Mr Lender, PiggyBank, and Sunny had replied.
Amigo Loans didn't comment, only telling The Sun that as a medium-term rather than short-term lender it shouldn't have been included in the Daily's Mail's research.
A spokesperson for CashFloat says it allows users to repay early without penalty and says it doesn't charge any fees. It adds that it offers lower interest rates to those who've repaid past loans.
Meanwhile a spokesperson for LoanPig said: "We are not predatory, nor do we disguise the costs involved in providing short term loans to customers who have been given the cold shoulder by their own Bank.
"At LoanPig.co.uk, we manually assess every loan offered, we make to ensure the customer knows the full facts of the loan and that they can afford the repayments."
Mr Lender points out that it lends to fewer than 3 per cent of applicants and says it never lends where any repayment would exceed more than 40 per cent of the borrower's disposable income.
It adds that it doesn't charge any fees - only the daily interest.
Dan Ware, chief executive of PiggyBank, commented: “We reject, on average, over 75 per cent of applications we receive. Our company policy is to offer the best solution for our customers, not necessarily the best outcome for the business.
"We also allow our customers the opportunity to repay their loans early without any additional fees, meaning they can save on the amount of interest they pay.”
Scott Greever, managing director of Elevate Credit, which provides Sunny loans, added: “Sunny was founded in 2013 for people who are unable to get credit from mainstream providers like banks, and was built on principles that have since become mandatory for the sector.
"Sunny has never charged any late repayment fees, we encourage customers to repay early to reduce interest and we have a 20 per cent cap on operating profits.
“If a customer is struggling to repay their loan we encourage them to contact us so we can help."
Stop the Credit Rip Off
Our Stop the Credit Rip-Off Campaign has also seen the FCA crack down on "exceptionally high" rent-to-own products, as well as make a raft of changes to overdrafts and introduce stricter rules for doorstep lenders.
A whopping 5.4million high cost credit loans were taken out in the year to June 2018, according to the FCA, up from 4.6million in the same period the year before.
One payday loan firm charging up to 306 per cent interest has even been targeting hard-up Brits in Facebook groups.
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