Online payday loan firms may be guilty of mis-selling, says lawyer
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Online payday loans could end up being the next mis-selling scandal, a former lawyer at the Financial Ombudsman Service has warned.
James Ward, associate at Thomson Snell & Passmore, said it is time for proper regulation of the sector. "If it transpires that lenders haven't acted ethically or provided adequate information to borrowers, a deluge of complaints may follow," he warned. "The legislation that regulates this area is simply not adequate."
He believes the problem with online lenders is their promise to lend funds instantly. "There is no time to assess whether they should be lending to the borrower at all, and this is virtually impossible without a face-to-face transaction," he said.
"A vulnerable consumer, desperate for some quick cash, will simply tick whatever boxes they need to get it without reading the small print. It is highly doubtful that they will understand the terms of the loan."
Payday loans are aimed at people who need short-term cash for a few days. As such they are expensive, with APRs of up to 5,000 per cent. Payday loan firms point out that their deals could be cheaper than going into the red at a bank, once you've taken account of penalty charges and daily interest. But traditional lenders tend to investigate whether a borrower is creditworthy and can meet repayments.
"Online payday loans should be banned. They are too easy to get, too quickly," Mr Ward said. "Or there should be a minimum time, at least seven days, between the application being accepted and the funds being provided. Restricting the number of rollovers allowed would also limit the extent to which loans could escalate."
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments