Payday loan complaints rise by whopping 227%

13 June 2017

Complaints about payday loans tripled in the 2016/17 financial year compared to the previous year, the Financial Ombudsman Service’s annual report reveals.

The free independent complaints arbitrator, which considers gripes when consumers have no luck with the company involved in the first instance, received 10,529 payday loan complaints in 2016/17 – a 227% increase on the 3,216 complaints it received in 2015/16.

Of the 7,234 payday loan complaints it resolved before the close of the financial year, over half (59%) were upheld in favour of the consumer.

Chairman of the Financial Ombudsman Service, Sir Nicholas Montagu, describes the rise in complaints about payday loans as “discernible”.

Juliana Francis, an ombudsman leader at the service, adds: “No two situations are the same. But many people who contact us have taken out more than one loan: in some cases, up to 20, often taken out in quick succession. And in around six in 10 cases this year, we decided the lender in question hadn’t acted fairly – for example, because they didn’t do enough to make sure that their customer would be able to repay what they owed. We’ve continued to talk to payday lenders this year to help them to give more customers fair answers the first time around.

“That said, the Financial Conduct Authority’s tougher rules for high-cost short-term credit are having an impact. Most of the payday loan complaints we’re now getting involve loans that were taken out some time ago.”  

But it’s not just payday loans, complaints about other forms of consumer credit have also risen with gripes about instalment loans and guarantor loans rising by 318% and 182% respectively over the same period – although the complaint numbers are smaller.

PPI still dominated complaints

Overall, the Ombudsman received 321,283 complaints in 2016/17 – down from 340,899 the previous year.

Payment protection insurance (PPI) continues to dominate complaints, with over half (52.5%) of all new complaints about PPI – although again this figure is down to 168,769 from 188,712 the previous year.

The overall uphold rate for PPI complaints resolved in 2016/17 was 52% - down from 66% the previous year.

Following PPI, the most complained about sectors in the last financial year were banking and credit at 31%, insurance (excluding PPI) at 12%, and investments and pensions at 4.5%.

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