‘Payback time’ as payday lenders campaign launched

Those who feel they have been mistreated by payday lenders are being urged to contact the ombudsman for advice.
Those who feel they have been mistreated by payday lenders are being urged to contact the ombudsman for advice.
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Huge controversy has surrounded payday lenders and their business practices in recent months – yet few people have made an official complaint to the ombudsman.

A new fight back campaign has been launched by Citizens Advice, urging people who feel they have been mistreated by a payday lender not to let the firm “get away with it”.

The debt advice charity wants to see more people who feel they have suffered at the hands of lenders taking their complaint to the Financial Ombudsman Service (FOS).

While consumers should initially make a complaint directly to the lender, if it cannot be resolved they can then ask the ombudsman to step in. The ombudsman can then help people to claw their money back when firms are found to be in the wrong.

Charities have reported being deluged with cries for help from people struggling with payday debt, including Stepchange, which said more than 7,000 people with five or more payday loans contacted it last year.

Yet despite these numbers, the ombudsman is still seeing only around 40-50 complaints about payday lenders each month and only 542 new complaints were made about payday lenders all of last year.

Consumer awareness about the ombudsman service has never been higher, thanks in part to the massive scale of the payment protection insurance (PPI) mis-selling scandal - it takes 2,000 calls a day from consumers about this alone.

So why is the ombudsman not seeing more complaints about payday lenders?

The answer is not really clear.

One possibility could be that some payday lenders are clearing problems up quickly when they receive an initial complaint from a customer. Payday firms have certainly been under the spotlight recently and there have been industry moves to drive up standards. Trade body the Consumer Finance Association, which represents short-term lenders, recently launched a new code of practice which members must abide by to improve customer protections. Lenders are also encouraging struggling borrowers to seek debt advice.

The whole payday sector is currently under investigation by the Competition Commission, which has the power to shake up whole markets where it sees fit. The Commission set to give its findings next year.

Another explanation, from the ombudsman service’s own research, suggests some people are reluctant to admit to having taken a payday loan out in the first place.

They sometimes take calls from people who might have a high-powered job and appear “asset rich” to the outside world and do not want to admit to others that they have been embroiled in a secret financial struggle. They may not have even told their wives or husbands they are having trouble with debt - but the service wants to reassure these people that it is there to offer help.

In other cases, it simply might not occur to some payday loan customers who are struggling that they could have grounds for a complaint.

People who are drowning in debt are, understandably, often very focused on their immediate money worries – but Citizens Advice also wants them to consider whether they were treated fairly.

By speaking up, consumers will put more pressure on those in the industry who have behaved badly to change their ways.

Analysis by Citizens Advice found that from the 665 cases brought to it by payday customers during the first half of this year, three quarters of borrowers would have grounds to take their complaint to the ombudsman.

One in five cases it looked at possibly involved fraud, where a person was apparently being chased for a loan they had never taken out.

One in eight involved allegations that lenders pestered customers with phone calls and texts rather than accepting offers of payment that were affordable.

With this in mind, if a payday loan customer does complain to the ombudsman, there is a high chance they will win their case.

More than seven in 10 complaints made to the ombudsman about payday lenders are resolved in the consumer’s favour.

The lender can be ordered to put things right – which could mean consumers being refunded loan repayments, interest or default charges or compensation for any inconvenience caused.


Whether you have a complaint about a payday lender or any other financial firm, the first step is to contact them directly to try and work the problem out.

Make a clear list of where you think the firm has gone wrong and what you want them to do about it.

If you are struggling with a payday loan and want to come to a repayment agreement, work out how much you can afford to pay and how often.

The lender should acknowledge your complaint within five days of receiving it. If they decide to investigate the complaint further, they should tell you and keep you regularly updated.

You can download a template letter from Citizens Advice to help you write your complaint at www.adviceguide.org.uk

If the firm has not sorted the problem out after eight weeks, you can then complain to the Financial Ombudsman Service.

The ombudsman service will look at your complaint and advise you how it can be sorted out. If you still do not get the result you want, the ombudsman service will start a formal investigation. The ombudsman service expects a firm which has been told that a customer is struggling financially to help the consumer to come up with a solution, regardless of whether or not the firm has made a mistake. The final decision is binding on the firm.

You can download a complaint form from www.financial-ombudsman.org.uk.

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