Advertisement
Become a member of the Big Issue community
JOIN
Money

Britain's financial regulator has issued a stern warning to high-cost lenders

After Wonga’s collapse, the Financial Conduct Authority has told the rest of the industry to keep rising complaints in check and to repay mis-sold loans even if it means going bankrupt

The Financial Conduct Authority (FCA) has issued a warning to high-cost lenders to clean up their act following the demise of Wonga.

The regulator has taken aim at the rising number of complaints made against some of the industry’s biggest names and also insisted that mis-sold loans must be repaid to the borrower. It was this insistence that proved to be the undoing for once-market leader Wonga, which was ordered to pay £2.6m in compensation to 45,000 customers and write off debts for 330,000 customers, following an FCA crackdown.

Wonga complaints
Wonga-complaints-table

Now, FCA chief executive Andrew Bailey has penned a letter to high-cost lenders CEOs stressing that firms should take into account “the scope and severity of the consumer detriment” from their actions. He also stressed that “consider whether it is fair and reasonable for the firm to proactively undertake a redress or remediation exercise, which may include contacting customers who have not complained”. Complaints have skyrocketed, according to Financial Ombudsman figures, with the majority of the lenders in the sector seeing the number of new cases rise in the last year.

CashEuroNet UK – Quick Quid and Pounds to Pocket parent company, saw an increase from 1,212 new cases between January and June 2017 to 4,692 cases for the same period a year later. Wonga’s own larger body, WDFC UK, experienced a rise from 1,434 to 4,520, while new cases against Elevate Credit International – the owner of Sunny – shot up from 279 to 839. Satsuma’s own parent firm Provident Personal Credit also follow the trend with new cases up from 266 to 1,192 over the same period.

Overall, there were 10,979 new complaints relating to payday loans between April and June 2018 – significantly higher than the 3,126 received in the same period 12 months previously.

Wonga profits
Wonga-profits-table

The Consumer Finance Association (CFA) has insisted that this complaints rise comes off the back of an FCA crackdown that paved the way for an avalanche of claims.

Advertisement
Advertisement

“There has been a rising number of complaints against short-term lenders, much of which has been driven by the involvement of claims management companies,” said the CFA spokesperson.  “This has prompted discussions between lenders, the Financial Ombudsman Service and the Financial Conduct Authority. We were expecting this letter from the FCA. Lenders have always been asked to consider reviews of past lending, and firms have already made proactive pay-outs since 2014. Our members remain committed to treating customers fairly.”

Big Issue Invest, The Big Issue’s social investment arm, is working with not-for-profit lenders like Five Lamps, Moneyline, Street UK and Fair For You to offer a fair credit alternative for those trapped in high-cost credit agreements.

Image: iStock

Advertisement

Become a Big Issue member

3.8 million people in the UK live in extreme poverty. Turn your anger into action - become a Big Issue member and give us the power to take poverty to zero.

Recommended for you

View all
Easy hacks for books and apps that every student should know
Student Life 2024

Easy hacks for books and apps that every student should know

How to live your best student life without breaking the bank. No, seriously
Student Life 2024

How to live your best student life without breaking the bank. No, seriously

How to navigate the new social world of university life – no matter your background
Student Life 2024

How to navigate the new social world of university life – no matter your background

Dear students: Here's how to get smart about money and save yourself stress later on
Student Life 2024

Dear students: Here's how to get smart about money and save yourself stress later on

Most Popular

Read All
Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits
Renters: A mortgage lender's window advertising buy-to-let products
1.

Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal
Pound coins on a piece of paper with disability living allowancve
2.

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal

Cost of living payment 2024: Where to get help now the scheme is over
next dwp cost of living payment 2023
3.

Cost of living payment 2024: Where to get help now the scheme is over

Strike dates 2023: From train drivers to NHS doctors, here are the dates to know
4.

Strike dates 2023: From train drivers to NHS doctors, here are the dates to know