New data from the UK’s Financial Ombudsman Service shows complaints about high cost loans have increased by up to 250% in a year. The decline of the payday loans industry, with the collapse of Wonga in August 2018 followed by the demise of QuickQuid just over a year later, has led to some people turning to other forms of similarly very pricey credit.
“ËœInstallment loans’ being offered by firms such as Satsuma Loans, part of the Provident Financial Group, and Peachy typically involved weekly or monthly repayments over three to 12 months and they can be “Ëœvery expensive.’ Peachy’s website quotes a representative interest rate of 855% APR and some people have taken out such loans as a way of refinancing unaffordable payday loans.
Complaints about high cost loans have increased considerably and often relate to affordability with companies not completing checks properly, leaving borrowers with extra interest and charges they cannot pay. Other complaints relate to firms acting unreasonably or unfairly when someone’s financial situation changes. The data also shows a big increase in complaints about guarantor loans where friends and family guarantee repayments on loans to people who may otherwise struggle to borrow.
Whilst the demise of high cost payday lenders like Wonga and QuickQuid is welcomed, other less ethical lenders have filled the gap and borrowers may be tempted by these high cost alternatives – or even illegal money lenders.
Borrowers should shop around and make sure they understand the total charge for credit as well as ensuring they can afford the repayments. It is also important to understand what will happen if personal circumstances change and borrowers should ensure they are dealing with a properly regulated organisation.
Just Credit Union provides ethical loans and will always ensure a loan is affordable. We will work with borrowers should their circumstances change and as a credit union Just Credit Union is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulatory Authority.
