Research carried out by NatWest and RBS has discovered that payday loan brokers are making over 1 million attempts per month to raid customer bank accounts. Paloma Kubiak from Money Saving Expert explains that a typical payday loan borrower cannot tell the difference between a lender and broker. With brokers offer instant cash and money to your account today, they do not transfer the funds directly, instead passing your details to more and more companies. Even worse, hidden in the small print, the broker is entitled to take a broker fee or admin fee of up to £75 for making the introduction despite the customer not actually obtaining a loan. Subsequently, the broker will raid the account over and over until funds are available and this is why Natwest are receiving as many as 640 complaints a day from Natwest customers who are being exploited by brokers. This demonstrates the potential scale of the issue since there could be even more complaints from other banks including Barclays, Lloyds and Halifax.
Customer that had hidden fees taken from a broker
The Guardian spoke to Wendy Scurr from Middlesborough who is on disability benefits and therefore wouldn’t pass a typical lender’s employment checks: “I put in my bank details as they said I had got the loan. But as soon as I submitted the final bit of information, it popped up that I had been declined. I felt that I had been conned out of my bank details, but I thought not much more about it.”
Things got worse for Wendy when she went to check her bank account and found that two unauthorised payments had been taken – £67.88 from My Loan Now and £59.99 from an unknown source. One can only imagine the stress of this, especially for the individual living on benefits but still in need for some extra funds. Wendy visited her bank to find out that My Loan Now had tried to take more funds but there was no more left in the account. She has consequently cancelled her bank account to avoid further attempts on her account. In addition, she receives as many as 30 phone calls a day to her mobile phone asking her if she would like to take a loan – and we bet that they aren’t direct lenders.
The Response from RBS and NatWest
When asked to comment on the issue, Terry Lawson, head of fraud and chargeback operations for RBS and NatWest, said: “We’ve seen large numbers of customers incurring charges they don’t expect when using a payday loan broker since July this year. 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.
“we’re pleased to say we’re seeing this decrease on account of the actions we’re taking to help stop these sharp practices.”
New Regulation in the Payday Loan Industry
The new regulation in the payday loan industry as driven by the FCA and CMA will come into effect in January 2015. There will be stricter rules as to who can provide the services of payday loans. Lenders, brokers and comparison sites alike who have previously applied for FCA interim permission (over 5,000 brokers) will still need to have an official license come February. One can also expect a larger role for payday loan comparison sites as each lender will be encouraged to be featured on at least one PCW and make it visible on the homepage of their website. Thus, encouraging applicants to shop around more for better payday loan prices or indeed, find more suitable alternatives.
At The Lenders List, we are a price comparison site and we are committed to offer payday loan direct lenders only. We are fully aware of the issues that customers face when dealing with brokers which is why we do not work with any brokers or work with lenders that charge upfront fees for applying. We appreciate that when a customer applies with a lender, that they are looking for funds and giving up some very personal details. Therefore, the last thing they want is to have funds taken out of their account or any further surprises. It is completely free to apply on The Lenders List. We simply feature the lenders and you can click through to the lender of your choice and apply directly. We do not charge you any fees or take any of your details and pass them on.
We have a very strict criteria of the lenders that we work with and each goes through a vetting process before we feature the on our site. Our homepage features a different set of direct lenders each month that we personally recommend based on their reputation and commitment to responsible lending. To see a true price comparison of the website, we encourage users to visit the individual pages of our lenders to get a better idea of the checks that they run and the costs involved. Each lender has slightly different rates and lengths of time that you can have the loan open for. Comparing different lenders could in fact save you up to £100 a year according to studies by the CMA. If you have any questions, we are always available to answer your queries via email or you can contact us through our social.