Hundreds of pounds taken for non-existent loans.
The Financial Ombudsman Service (FOS) has spoken out against fraudulent websites which offer payday loans that never materialise.
Figures released by the FOS show more than 10,000 people have contacted the Ombudsman this year complaining that middlemen have taken money from their accounts without their knowledge. Some accounts were even debited multiple times without warning and their details were passed on to other credit broking websites.
These are some of the worst cases that the Ombudsman has seen. Shockingly, the total number of complaints it has received relating to payday brokers has doubled since 2013.
What is a payday loan middleman?
These 'go-betweens' swindle people who are struggling with debt, often by posing as a payday lender themselves. They charge higher fees than agreed or impose fees for services that the borrower didn’t sign up for. In many cases, no loan was ever provided.
Some brokers have even charged borrowers before they’ve finished their application form.
Stepping in
In the majority of cases reported, the businesses running the websites refunded the complainants as soon as the Ombudsman got involved. In two-thirds of the complaints investigated, the Ombudsman agreed that the borrower was treated unfairly. In the remainder of cases, the complainants’ fees had already been refunded.
The FOS also pointed out that many people applying through these websites thought they were applying to loan providers directly, not through a broker.
If you’ve been affected
Once you’ve supplied your details to a payday broker online, you might not know you’ve been charged until you see your next bank statement.
The broker may argue that the fee was in your terms and conditions, but you’ve still got cancellation rights for 14 days after signing the contract. Try to do it within that window as it becomes more difficult after that.
Once you’ve cancelled, the Distance Selling Regulations mean you should get your refund within 30 days.
However, research from Citizens Advice earlier this year proved that getting your money back is difficult to do on your own. Out of 228 cases, 28% of customers who attempted to secure refunds were refused while 14% were promised a refund which never appeared. And 42% struggled to even get hold of the broker to request their money back.
If you're struggling to get a refund, you can contact the Financial Ombudsman Service to ask it to intervene on your behalf. Just call 0800 0 234 567 or visit financial-ombudsman.org.uk.
More on payday loans:
Why the payday loan industry needs cleaning up now
Numbers struggling with payday loan debt doubles
Archbishop of Canterbury’s payday loan gaffe may yet pay off