The high street bank, Natwest, have expressed concern recently over a high number of their customers complaining about funds being taken from their accounts by payday loan companies and brokers acting on behalf of payday loan companies. They have been receiving approximately 640 complaints a day from concerned customers who have had funds taken from their accounts without permission. The payday loan brokers showing in their accounts usually withdraw between £50 and £75 under unfamiliar, unrecognisable names. This charge has been revealed to be based on a fee charged for finding the borrower a payday loan, but the details of this are actually buried in small print and not made clear to borrowers.
The loans taken out are then charged at interest rates of up to 3,000%, and customers’ details can sometimes be shared with other payday loan brokers and companies who “attempt to levy charges against the individual”, according to a report in The Guardian. Natwest saw “1 million attempts by payday loan companies to take money from its customer accounts, although the majority were rejected as the customers were already seriously overdrawn.” As more and more sinister methods have been highlighted, such as companies specifically targeting vulnerable people and withdrawing from their accounts at times when state benefits are automatically paid in, the Financial Ombudsman Service has been receiving more and more complaints.
Tougher regulation was brought in to monitor the practices of payday loan companies in March this year, and the FCA consequently forced a quarter of payday loan companies to close as they were not operating according to the new rules. Since the FCA took control, payday loan companies have been forced to conduct more credit checks and restrict their ability to withdraw from borrowers’ bank accounts, and from January the rules will become even stricter, with interest rates being capped at 0.8% a day, and no borrower having to pay back more than double what they originally borrowed.
The FCA’s regulation maintains the safety and reliability of a variety of financial services, such as peer-to-peer lending and investment, cash ISAs and second state pensions, amongst other products. Many welcome the same level of regulation for payday loans companies.