Payday lenders under fire again as financial complaints soar across the board
Regulators must act to redress the balance as financial services companies put profits above customers
Payday lenders inevitably grabbed most of the bad headlines when the Financial Ombudsman Service released its latest set of frankly appalling complaints numbers.
The FOS used the term “unacceptable” to describe the behaviour of short term lenders and it could have gone a lot further than that.
With the payment protection insurance mis-selling scandal winding down, case officers could have been forgiven for turning their attention to the labour market.
The flood of new payday loan complaints finding their way to the Ombudsman’s doors - they rose 130 per cent over the 2018/2019 financial year - suggests they’ll have secure employment for some time to come.
I have likened the industry to legalised loan sharking in the past. Figures like these prove the point. The Financial Conduct Authority’s imposition of a price cap, which played an important role in chasing some bad actors out of the industry, has clearly done little to improve practices at those that remain.
But it isn’t just payday lenders that look set to keep the Ombudsman’s staff in gainful employment for as long as they want it.
Complaints were up across a range of business areas despite the fall in PPI related work, which has been the mainstay of the service’s business for several years now.
The overall number increased by 14 per cent to a staggering 380,000 thus demonstrating that the “services” part of financial services is too often absent from the equation from the consumer’s perspective.
The way the industry is handling issues such as fraud, IT failures, or just the day to day business of filing an insurance claim and getting it dealt with, are too often being found wanting.
The financial industry’s products range from essential (bank accounts) to as good as (many types of insurance) to highly important (savings, credit).
They are also are highly profitable. One only needs to look at the prevalence of financial companies in the upper reaches of the FTSE 100 clearly to see that.
The ombudsman’s figures indicate that their providers are taking advantage of the fact that we can’t do without their wares to prioritise their profits over their responsibilities to the customers who fuel them. “They have to come to us so we can treat them as we like,” seems to be the operating principle across the entire industry.
Wayman says practices must improve, and so they should. It’s notable that the figures were released only a couple of days after MPs on the Treasury Committee said banks should have a legal duty to act in consumers’ best interests. If they and their friends in insurance, and other areas, fail to shape up then the Financial Conduct Authority must be inveigled upon to force the issue.
But as Wayman says, it’s simply not good enough across the board.
One of the FCAs beloved “dear CEO” letters reminding all of its charges of their responsibilities would seem in order as a good first step. Harsher measures should swiftly follow if improvement isn’t rapid.