Another blow for payday lenders amid ‘nuisance call’ claims

Payday lenders have received another blow to their reputations after a charity suggested they are using bullying tactics to encourage people to take out their loans.

StepChange, which offers advice for people in serious debt, told the Independent that a third of its clients are being bombarded with nuisance phone calls offering high-cost credit.

In some cases, the charity claims financially vulnerable people are being targeted an average of ten times each week, something that could put them under serious pressure.

The calls are leading to loans being taken out too, with the average borrowed being £980 – and the borrowers stacking up more interest and repayments to cover.

StepChange warned that payday lenders seem to be pursuing vulnerable people are a common tactic.

“Nuisance marketing calls can be harmful and push vulnerable consumers deeper in the downward spiral of unsustainable borrowing. The offer of an easy, no-questions-asked loan can seem like a financial lifeline. But the reality is that it can be a financial noose around the neck of vulnerable people and their families,” said spokesperson Mike O’Connor.

He criticised data protection legislation that allows information about those who are in debt to be passed on and sold to financial service providers, which allows companies to pursue them.

StepChange is now calling for payday lenders to be subject to the same laws as those that prevent mortgages being sold through unsolicited calls, asking the Financial Conduct Authority (FCA) to take action as soon as possible.

The news comes at a particularly bad time for payday loans firms, after the Financial Ombudsman Service said complaints from consumers about problems in the sector more than doubled in 2013-14.

It has already been announced that the FCA is to introduce a cap on payday loan costs to address the issue of borrowers being charged excessive sums in interest. The organisation said it wants to impose a new regime of capped charges with effect from January 2015.

However, these recent findings could mean that lenders may also soon be facing tougher rules on how they sell their products in the first place.

Looking for compliance jobs? Search with Barclay Simpson, experts in compliance recruitment