On the same week that saw a super complaint being lodged against banks for fees associated with converting pounds to foreign currencies, another consumer group Which? Is waging war against poor practices in payday loans.
Included in the complaint to the Office of Fair Trading is the allegation that payday loans also breached the Consumer Credit Act as well as insufficient emphasis on privacy. It was noted that APRs were especially inflated as well. All of these are noted in the complaint filed with OFT.
Mentioned especially in their complaint are two companies, Swiftmoney.co.uk and Paydaykong.com. It was noted that Paydaykong.com may not have had a consumer credit licence and Swfitmoney.co.uk did not disclose the APR on its loans. Both of these are in direct violation of the Consumer Credit Act upon which their complaint is based.
Which? also noted that many payday loan companies made misleading claims, especially in regards to the APR and some firms went out of their way to encourage customers to take bigger loans than were needed. Some were also encouraged to rollover current loans for months at a time which is grievous because a majority of money paid is in interest.
In 2010 alone there were more than £1.9 payday loans issued and the previous year that total was £1.2. Unfortunately, this type of loan carries exceedingly high interest and is only taken out by consumers who have no other recourse when in need. They are high risk loans which is why interest rates are so high.
Since the economy is on a downward spiral, more and more households are relying on payday loans. This is why Which? Feels it is of prime importance for regulators to keep a watchful eye on financial institutions providing the loans. It is their hope that violators will be dealt with firmly.
