We have had concerns over how some payday loan companies have been operating for some time now, and have previously voiced these concerns to the OFT. In fact, in our most recent communication with the OFT, we pointed out that our own investigation here at Confused.com threw up cases where some payday loan companies were not treating customers in a fair or responsible manner.
Cardiff, UK (PRWEB) July 22, 2010
In response to the OFT report into high cost credit, Confused.com is calling for greater clarity on fees and charges associated with payday loans, after its own investigation revealed a lack of transparency around what happens if a consumer fails to meet repayments.
The comparison site reviewed the websites of a number of payday loan providers and found that many cause confusion for customers by not clearly displaying fees and charges associated with rolling these types of loan beyond the agreed period.
The majority of sites reviewed by Confused.com offered insufficient advice on this subject, despite the OFT responsible lending guidelines stating that lenders must outline "the principle consequences for the borrower of not keeping up with repayments".
In one case, a Confused.com researcher was refused information about deferral charges until he opened an account with the provider, which said it was only at this point he would be given information about the deferral process.
The Confused.com researcher was also told by the same provider that it was not possible to open an account unless a loan was also applied for, meaning consumers would not be aware of the deferral charges and process until they actually applied for the loan - leaving some consumers at risk of entering an agreement blind. Following this, a complaint was put into the OFT, to which we are still awaiting a response.
Confused.com is therefore calling for measures to better protect consumers, starting with the introduction of a code of conduct (as suggested by the OFT) which includes clear, easily available information about the deferral process and any charges involved.
In addition, Confused.com is calling for:
- Much more stringent checks to ensure forbearance across the industry for those with ongoing debt problems. While some currently offer support for those unable to pay off their debt, our feedback from customers indicates that this is not being offered across the board
- A push to make payday lenders offer or promote the use of free, impartial advice in the same way banks do
- Support and promotion for credit unions as a source of lower cost lending
Sharon Flaherty, editor at confused.com said: "It is ironic that in some cases the headline rate information is clearer for payday loans than it is for mainstream lenders. What's a real concern though, is the lack of clarity over what happens if you default. As a starting point, we think payday loan companies should be forced to make it clear on their websites what will happen if a customer misses a payment or can't meet the repayment schedule. More transparency is crucial so customers know exactly what they are getting themselves into when they sign up to these loans. We urge all providers to adopt this approach.
"We have had concerns over how some payday loan companies have been operating for some time now, and have previously voiced these concerns to the OFT. In fact, in our most recent communication with the OFT, we pointed out that our own investigation here at Confused.com threw up cases where some payday loan companies were not treating customers in a fair or responsible manner."
Confused.com also revealed that it had been contacted by customers who have had repayment difficulties and been shown no forbearance by the lender, contrary to findings from the OFT.
Sharon continued: "We've been contacted by people who've taken these types of loans and are being treated really poorly by the providers when they face repayment difficulties. Often the customers aren't aware of the options available to them, both in terms of escalating complaints and alternative credit options such as credit unions. We'd therefore like to see greater government support for the expansion and awareness of lower cost alternatives."
During Confused.com's investigation, it emerged that some customers didn't know credit unions were available to them - a fact supported by the OFTs own finding that 62% never considered any other options before taking out a high cost product.
Believing that there are many more examples of customers who have faced problems when dealing with these companies, Confused.com is asking people to share their experiences, in order that we can present a collection of accounts to the OFT to highlight the extent of difficulties customers have faced.
Sharon said: "We suspect that there are a lot of high cost credit customers out there who haven't understood the terms and conditions, who have suffered repayment difficulties and who are being shown no support. It's a fact supported by the OFT's own report they many people who use these loans have limited awareness about their financial options and what to do when things go wrong. We would like to see fewer people caught out in the future, and lenders to provide the same free impartial advice that banks do."
For further information please contact:
Press Office, Confused.com 02920 434 398
Confused.com is one of the UK's biggest and most popular price comparison services. Launched in 2002, it generates over two million quotes per month. It has expanded its range of comparison products over the last couple of years to include home insurance, travel insurance, pet insurance, van insurance, motorbike insurance, breakdown cover and energy, as well as financial services products including credit cards, loans, mortgages and life insurance.
Confused.com is not a supplier, insurance company or broker. It provides a free, objective and unbiased comparison service. By using cutting-edge technology, it has developed a series of intelligent web-based solutions that evaluate a number of risk factors to help customers with their decision-making, subsequently finding them great deals on a wide-range of insurance products, financial services, utilities and more. Confused.com's service is based on the most up-to-date information provided by UK suppliers and industry regulators.
Confused.com is owned by the Admiral Group plc. Admiral listed on the London Stock Exchange in September 2004. Confused.com is regulated by the FSA.
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