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Consumers warned to watch out for payday loan 'middlemen'

Consumers warned to watch out for payday loan 'middlemen'
Date of Publication: Wednesday, 20 August 2014 14:16

The Financial Ombudsman Service (FOS) has condemned credit broking 'middlemen' after more than 10,000 customers complained they had been ripped off.

 

Thousands of financially vulnerable people have seen hundreds of pounds deducted from their accounts by credit brokering websites that failed to live up to their promises.

 

These ‘middlemen’ sites promise to source the customer a loan in return for an administration fee, but in many cases they fail to deliver.

 

Some people saw multiple sets of fees debited from their accounts after their details were circulated around other brokering sites, which also processed them as a customer.  

 

The ombudsman said that grievances against credit brokers were on the rise.

 

It has received more than 10,000 complaints about them already this year, which is more than double the number received in the whole of last year.

 

Most of the brokers refunded the money after they were contacted by the ombudsman. In the other two-thirds of the cases investigated, the ombudsman ruled in the customer’s favour.

 

The ombudsman said many people had mistaken the credit broking sites for a lender and didn’t realise they were paying fees to an intermediary rather than applying for a loan directly.

 

The situation bears some resemblance to the recent outbreak of ‘copycat’ websites – sites that mimic official websites and charge hefty administration fees to process documents that customers can do themselves for free or at much lower cost.

 

The ombudsman said customers needed to be wary about what they were paying for, and stated its intent for dealing with disreputable brokers.

 

“In our view, it’s fair that the consumer if refunded as soon as it becomes apparent that they’re not going to get a loan,” the FOS said.

 

“It’s also important that brokers make sure they’re giving clear information about when and how fees are charged – so consumers aren’t surprised when the money’s taken from their bank accounts.”

 

Keith McDonald

Which4U Editor

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Wednesday, 20 August 2014 14:16
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