Payday loan brokers accused of ripping off struggling Brits

October 30, 2014

Some of the most financially insecure people in Britain are having money taken directly out of their bank accounts by payday loan brokers, a number of different parties within the UK’s financial service sector have warned.

NatWest Bank, part of the Royal Bank of Scotland (RBS) Group, has revealed that it is receiving more than 600 complaints each day about the practice from its customers around the country who in many cases are unaware of why money has been taken from their bank accounts.

Responsibility for the problem is reckoned to lie with brokers of payday loans, whose services are designed to match would-be borrowers with lending deals but whose charges are apparently not always made clear to end users of the relevant financial products. Plus, it is believed that brokers are taking the banking details of people who apply to use their services and the passing them around to dozens of similar companies who can then look to levy charges against the unwitting individuals as well.

Small print buried in the documentation involved in using these payday loan brokers allows for the companies themselves to levy charges, usually between £50 and £75, and to pass on the bank details as they choose. The result of which is that thousands of struggling UK consumers are finding themselves being hit with charges by organisations they’ve never heard of or had any direct dealings with.

“We’ve seen large numbers of customers incurring charges they don’t expect when using a payday loan broker since July this year,” Terry Lawson, head of fraud and chargeback operations for RBS and NatWest, is quoted as saying in the Guardian.

“Customers’ account or debit card details are gathered and sent on to up to 200 other brokers and lenders who charge them fees for a loan application. At its height we were seeing up to 640 calls a day on unexpected fees, but we’re pleased to say we’re seeing this decrease on account of the actions we’re taking to help stop these sharp practices.”

The Financial Ombudsman Service weighed in on the issue recently, saying: “Since the start of the year thousands of people, many struggling financially, have contacted the ombudsman complaining that payday loan middlemen had drained money from their accounts, without providing them with the loan they were looking for.”

According to the Ombudsman, most instances in which these payday loan “middleman” took money from bank accounts were resolved by way of full refunds after it got involved and the relevant brokers were contacted.

It’s believed that many thousands of attempts to withdraw money from the bank accounts of UK consumers are currently being made every month by what are being described as a new breed of payday loan brokers. Concerns have been raised that the people most likely to be impacted are those who receive state benefits or are already struggling to deal with their personal debts.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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