Payday loan customers ‘have grounds for complaint’

Payday loan customers have grounds for complaints over the way repayments are collected, according to Citizens Advice.

The charity said it saw 665 cases of questionable behaviour by payday loan firms and claimed 76 per cent of them could have been referred to the Financial Ombudsman.

The payday loan industry has signed up to a code of conduct in an attempt to improve standards in the sector, however, it appears little is being done to change things.

Of the 50 lenders given a deadline by the Office of Fair Trading to prove their business practices were meeting standards, 15 have since stated they will not continue operating.

Some of the cases looked into by Citizens Advice included people being chased for a loan they had never even taken out.

Citizens Advice chief executive Gillian Guy said: "The level of debt and hardship caused by some payday loans is absolutely scandalous and people often feel completely powerless to do anything about it."

However, she stated consumers can "fight back" and should complain about their treatment to the Financial Ombudsman.

Over a third of the cases saw payday lenders implement a recurring system known as a continuous payment authority to take money from customers' bank accounts without notifying them. 

In just 12 per cent of these instances the firms refused offers of affordable payment plans from customers and continued to badger them with phone calls and text messages.

Frances Walker, a spokesperson for the debt charity StepChange, told the Independent companies were using aggressive tactics against vulnerable people and that it should not be happening. He said the use of continuous payment authority is supposed to stop once individuals have defaulted or are having difficulties paying back the money. However, there is evidence firms are not honoring this agreement.

With people struggling with their finances on a monthly basis payday loan companies are becoming popular. However, consistently using them can lead to spiralling debts, which could have been managed more effectively.

By James Francis