Complaints about high-cost credit reach highest level
Payday loans drive a jump in consumer credit complaints to the financial watchdog.
The number of complaints about high-cost credit has reached its highest level on record, raising concerns about how lenders treat vulnerable consumers.
In 2017-18, the number of complaints about consumer credit rose by 40% to just over 36,300, according to the Financial Ombudsman Service (FOS).
More than half related to payday loans, with customers warning the ombudsman about irresponsible lending and unaffordable loans.
There can be a very fine line between getting by and going under. Even people who seem to be on top of their finances can quickly become vulnerable Caroline Wayman
The number of new complaints about payday loans soared 64% from 10,529 to 17,200. The ombudsman service upheld six in 10 of the complaints.
Caroline Wayman, chief ombudsman at the FOS, said: “People buy a whole range of things on credit – from everyday household appliances to a car – and in many cases it’s manageable and affordable.
“But for some people, borrowing may be a necessity rather than a choice. There can be a very fine line between getting by and going under. Even people who seem to be on top of their finances can quickly become vulnerable.”
Excluding payment protection insurance (PPI) products, which make up more than half (55%) of the complaints, consumer credit worries represent almost a quarter of those received by the watchdog.
Consumers were most concerned about hire purchase, point-of-sale and catalogue shopping loans.
The service received almost 340,000 new complaints in 2017-18, compared with 321,000 the year before.
Regulators have launched a clampdown on payday lenders in recent years, with firms forced to limit the amount they charge in interest and the number of times they can roll over loans.
This week, the Financial Conduct Authority will publish its review of high-cost credit. The watchdog said in January that it was most concerned by overdraft charges, rent-to-own services, doorstep lending and catalogue credit.