Complaints about payday lenders soar despite fears of ‘shame factor’

Financial Ombudsman 5,395 inquiries about payday loans in the past financial year

Complaints about payday loans have more than doubled in the past two years, but the Financial Ombudsman warned yesterday that the “shame factor” was putting off most people from complaining.

“It’s important people don’t feel trapped with nowhere to turn for help because of the stigma that is associated with short-term lending,” said the principal ombudsman, Caroline Wayman.

The ombudsman received 5,395 inquiries about payday loans in the past financial year and found in favour of the consumer in two-thirds of cases.

It said that disappointingly high numbers of people were unaware that they could speak to the ombudsman if they felt that they were not being treated fairly.

Martin Wheatley, the chief executive of the Financial Conduct Authority, said in response: “Very often the people who are going to payday loans companies are the most vulnerable and not financially the most literate.

“People need to know that the ombudsman service is there before they can take their case to it.

“We know that they walk into debt charities such as Citizens Advice and StepChange a lot because they’re on the high street.

“But we and the ombudsman have the challenge of letting them know there’s a route to get help if they have a problem with a payday lender.”

The City regulator last week introduced tough new rules that payday lenders have to operate under, including a ban on rolling over loans more than twice and a limit of two set on how many times they can attempt to take money from borrowers’ bank accounts under controversial continuous payment authorities.

The ombudsman warned payday lenders over their poor business practices and called on them to take a positive approach when tackling customers’ concerns. Mike O’Connor, the chief executive of debt charity StepChange, said: “The fact that most complaints against payday loan companies are upheld is further evidence that when it comes to acting in the best interests of consumers, in many cases they fail to do so.”

Mr O’Connor said that the payday loan industry had been a problem for many years. “Unaffordable lending, the misuse of continuous payments to drain money from customers’ accounts, the rolling over of loans and inflating debts with additional charges have been commonplace and damaging,” he said.

Last year the charity reported that 66,557 people with payday loans sought its help, an increase of 82 per cent over the previous year.

The ombudsman said the most common cause for complaint was from people saying that they had not taken out the loan, which suggests that fraudsters who apply for payday loans using other people’s details may be increasing  their activities.

But people also raised concerns about poor service and administration, payday lenders not being willing to help those struggling to repay and aggressive debt-collecting practices.

“We often hear from people who took out a payday loan as a desperate last resort and blame themselves when the debt starts to spiral out of control,” Ms Wayman said.

The ombudsman is scheduled to publish a report later this summer looking into the payday lending complaints that it receives.

Start your day with The Independent, sign up for daily news emails
News
people
News
A survey carried out by Sainsbury's Finance found 20% of new university students have never washed their own clothes, while 14% cannot even boil an egg
science...and the results are not as pointless as that sounds
News
politicsIs David Cameron trying to prove he's down with the kids?
News
Dominique Alderweireld, also known as Dodo de Saumure, is the owner of a string of brothels in Belgium
newsPhilip Sweeney gets the inside track on France's trial of the year
PROMOTED VIDEO
News
Cumberbatch was speaking on US television when he made the comment (Getty)
people
Life and Style
tech
Arts and Entertainment
Tom DeLonge, Travis Barker and Mark Hoppus of Blink-182 pictured in 2011.
musicBassist Mark Hoppus and drummer Travis Barker say Tom Delonge is 'disrespectful and ungrateful'
Sport
football
Arts and Entertainment
Olivia Colman and David Tennant star in 'Broadchurch'
tvBroadchurch series 2, episode 4, review - contains spoilers
Sport
cyclingDisgraced cycling star says people will soon forgive his actions
News
Britain's Prince Philip attends a Garden Party at Buckingham Palace in London
people
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Ed Sheeran will play three sell-out gigs at Wembley Stadium in July
music
News
i100
News
Lena Dunham posing for an official portrait at Sundance 2015
people
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea