The financial ombudsman continues to receive payday loans complaints more than 200 complaints a week. Many of these complaints are not limited to low-income earners who depend on the loans to get by the day.
Between the third and fourth quarters of the 2016 fiscal year, the Financial Ombudsman Service received 5,095 new payday loans associated complaints, which is an increase of 22% from the first and second quarters the year. This expansion came in spite of stricter policies set by the regulator in the ever-controversial financial sector.
These figures from the financial ombudsman service mean that the complaints concerning payday loans are currently streaming in at a rate of around 850 every month. In the early months of 2013, the ombudsman would receive around 30-40 cases every month. Many of the complaints are about the affordability of the loans – for instance, a borrower asserting that there was a haphazard undertaking of affordability checks by lending firms.
The ombudsman additionally disclosed that those complaining about payday moneylenders included educators, medical caretakers, students and “even a modest bunch of vets,” demonstrating that this was an issue affecting individuals from “all kinds of different backgrounds.”
The hike in the number of complaints is a result of a regulatory clampdown on the multibillion-pound financial segment, which the Financial Conduct Authority (FCA) started regulating in April 2014. From that point on, payday loans lenders have been required to make tougher affordability checks, and their adverts on multiple media are receiving more scrutiny. January 2015 saw the introduction of price caps on payday loans, a move that lowered the borrowing costs for many individuals in need of the loans.
The office of the financial ombudsman for a while now have released reports saying that the rise in payday loans complaints show that more individuals are more aware of their rights whenever the payday loans companies do them wrong.
Looking at the financial complaints, the Ombudsman acted on 149,864 new cases in the third and fourth quarter of 2016, which was 11% decrease in the cases handled in the first two quarters of the year.
With over 78,000 protests relating to insurance premiums for protecting the creditor if they do not receive their payment top the list regarding quantity and they make up the greater part of the total complaints. Nevertheless, the 3,000 or so payment protection insurance (PPI) complaints the financial ombudsman service receives in a week has dropped from a high of 12,000 in a similar period.
The Bank of Scotland, the group brand for smaller credit brands such as the Birmingham Midshires and Halifax, is one of the businesses that bore the brunt of the complaints in the period with 19,555 complaints. Lloyds of London and Barclays took the second and third place with 18,411 and 13,379 complaints respectively.
In the report, the normal “uphold rate” over the six-month period, where the financial ombudsman ruled for the debtor, was 42%. Coventry building society had the most minimal maintain rate at 6%, while HFC Bank, an auxiliary of HSBC, had the most elevated at 87%.
The financial ombudsman also noted that banks have started putting aside copious amounts of money for potential remuneration about packaged bank accounts. These accounts charge clients more than £204 a year for benefits such as protection of the ATM card and during the clients travels. Also, a few complaints point towards that management firms has changed their focus from PPI to urging individuals to claim remuneration for packaged account misselling.
The report also showed that the financial ombudsman service received few complaints about new age banking services, such as mobile installments and contactless card. The Financial Ombudsman Service is set to release the report for the first half of 2017 and we wait to see if the regulations have had an effect on taming the payday lenders.