One of the fun games to play during lockdown was 'First Against the Wall'. The answer to most questions asked in the game, to be fair, was 'Davina McCall', but if its categories were extended beyond human beings surely one of the first to be lined up would be pay-day loans companies. What else could a person shout out?
"Louis Walsh." Well, sure; but on some days the insufferable Irishman would creep into the homo sapien category, leaving the field clear for pay-day sharks to look down two barrels of their come-uppance.
Yesterday (Monday 15 March) Provident Financial warned that it might have to put its home credit division into an insolvency process. Oo, can we choose? Liquidation please, Liquidation. It issued the warning after experiencing a surge in customer complaints to the Financial Ombudsman Service, from 3,500 in the first half of last year to 10,390 in the second half. Payments to customers rose to £25 million between July and December 2020, compared with £2.5 million in the same period in 2019. Amigo, a provider of loans guaranteed by a family member or friend, was the subject of 12,854 complaints to the ombudsman in this period, ten times more than in the first six months.
The principal hatchet men of the pay-day loan sharks are the claims management companies who themselves are not invulnerable to being lined up to face a bullet or two. This is what ultimately put paid to the detestable Wonga, following a flood of mis-selling complaints on behalf of customers, which the company could not pay. Other high-cost credit companies are nervously looking over their shoulders as claims management companies, not sated by their main source of PPI claims income, are hungry for more.
The Financial Ombudsman Service has said that in its latest reported quarter of October to December, it received more than 10,000 complaints about guarantor loans, compared with just over 300 in 2019. It also received more than 6,000 complaints about doorstep loans compared with 430 the year before. Almost all the complaints were about unaffordable loans, with most filed for individuals by claims companies.
High-cost loan providers complain that the wave of attacks by claims companies has been particularly tough because the ombudsman is imposing stricter consumer protection standards introduced by the Financial Conduct Authority since 2014 on historic loans.