Credit crunched. That’s the situation too many Britons are finding themselves in, as the latest figures from the Financial Ombudsman Service make all too clear.
The number of complaints about payday lenders surged by a shocking 230 per cent to 10,529 during the year to 5 April.
Partly that could be due to a wave of publicity given to wonga.com and the generally shabby behaviour common across the sector a while back, together with the efforts made to make people more aware of the rights they have.
But with the ombudsman projecting a similar number of complaints this year, it is clear that bad behaviour among payday lenders continues to be a problem.
A surge in payday cases was responsible for a large part of the near doubling in complaints about consumer credit generally – 25,984 against 12,713 the previous year.
However, it wasn’t solely responsible. Other forms of credit are also causing trouble, and while the number of complaints recorded is still relatively small when compared to, say, cases involving payment protection insurance, it should still be ringing alarm bells with watchdogs.
That’s not least because the number of Britons who are struggling to make ends meet is rising. It became a feature the general election campaign, and likely played a role in the strong showing by Jeremy Corbyn’s Labour Party.
The rise is continuing apace. Inflation surged to 2.9 per cent in May, leaving it at its highest rate since June 2013, driven by the weakness in the pound (hello again Brexit). Wages are not keeping up. The most recent official figures (for the three months to March) found that average weekly earnings excluding bonuses rose by 2.1 per cent.
Significantly, increases in the cost of essentials such as children’s clothing, and food, have started to play an important role in the inflation figures, despite the supermarket price war.
That should be of particular concern to policymakers. They are the sort of things people can’t do without. If you’re struggling, if it’s a choice between a high-interest loan and not feeding your kids, what are you going to do?
The answer, for too many people, is to go online to anotherpaydaylender.com and to click “yes” in the box saying “do you agree to our terms and conditions” despite the drain sky high interest rates will impose on future budgets.
Perhaps something will turn up. Perhaps the zero hours contract will provide extra hours next month. Perhaps overtime will be available. The workplace lottery syndicate might get more than the odd tenner.
It’s a sobering thought that these sorts of problems are occurring much further up the income scale than they used to and Brexit is only going to make them worse.
We are just beginning to feel the economic consequences of that lunacy, and we haven’t actually left the EU yet. If the zealots in the Tory party get their way and Britain crashes out with no deal, best find some cover, because compared to what is going to happen, the economic rain we are enduring right now is but a shower.
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The underlying economic problems that have left too many Britons struggling are a long-term challenge facing policymakers that Brexit will greatly exacerbate.
However, there is action that can be taken in the meantime to alleviate the symptoms. What the figures make clear is that an awful lot of companies are behaving very badly. Remember, you can only go to the ombudsman after you have first complained to your lender and been given the brush off.
Lenders need to be reminded of their responsibilities. The Financial Conduct Authority might start with one of its dear CEO letters in response to the figures. If that doesn’t work, if it fails to bring about a reduction in complaints, then the regulator needs to be prepared to bring the hammer down.
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