OFT writes to 240 payday lenders to warn them over poor practices

The legal loan sharks have been cautioned.

After publishing further guidance on debt collection, the Office for Fair Trading (OFT) has now written to all 240 payday lenders operating in the UK after starting an investigation in February 2012 to investigate how lenders carry out debt repayments after it was revealed there were "emerging concerns" over poor practice. 

The guidance by the OFT clarifies what is expected when using continuous payment authority (a method of payment via debit or credit card to a company one wishes to make regular payments to) to recover debts, and it is high time guidance was clear on this issue.

Many companies have been found to use tactics that could very well be described as bullying and intimidation. Even well-known lenders like Wonga were warned by the OFT to stop sending letters to its customers accusing them of committing fraud

The worst example of debt recovery from a payday lender I have heard of is from the company CIM Technologies Ltd, also known as Tooth Fairy Finance. Action was taken on them by the OFT in 2010 to stop them from taking advantage of continuous payment authority but varying the repayment dates for loans taken out and the amount payable on each installment.

On a post written up on the Credit Action Group forum, one member writes what it was like being a customer of Tooth Fairy. After taking out a loan of £100, failing to meet a payment and having requests of an extended payback period fall on deaf ears, the person alleges that Tooth Fairy then decided to:

  • [Call] my home number on a daily basis leaving information regarding who they are and my private account with them, that is that I have an outstanding loan and how much it was for, leaving the information open to third parties.
  • [Send] me various emails each day telling me that they are adding fines to my loan.
  • [Threaten] me with bailiffs and bankruptcy – for a £100 loan? I don’t think so. They also said they would send bailiffs to all known addresses to collect goods up to nine times the value of the debt.
  • [Tell] me they have passed my file to a solicitor and they are charging me £150 for this to be done. I have not heard from any solicitor or any debt collection agency (West Yorkshire Security Debt Collections) whom they say they have also consulted with.

Another post on the group claims that the borrower would hear nothing from the company for weeks, even while charges were still clocking up, and that Tooth Fairy avoided going through normal procedures of lateness charges or debt plans.

But better debt collection methods is just one element of the wider concern about how the payday lending industry is regulated.

David Fisher, director of consumer credit at the OFT, said earlier this year that he hoped the Financial Conduct Authority (or FCA – which will eventually replace the OFT in responsibility of consumer credit regulation) would bring the prospect of greater regulation, as at present there is “a very light-touch regime”. 

Though even getting close to this is proving problematic as efforts are still being made to add an amendment on the Financial Services Bill to give the FCA power to cap the total cost of credit. Until such regulatory common sense is considered then lenders will still have free terrain over vulnerable consumers. 

Update

A representative of Web Loans Processing, the parent company of Toothfairy Finance, has asked us to clarify a couple of points in the article. We are happy to do so, and to note that the Financial Ombudsman has not ruled against Toothfairy with regards to any non-paying clients:

The Article makes comments regarding bailiffs, solicitors, added fees and regular contact with customers via email and phone; a little research would have quickly identified all this as standard practice when bailiffs are recovering debt, even for high street banks.

Further, maintaining regular and consistent contact with clients is a requirement of any credit licence. Toothfairy Finance works with its customers and we are happy to discuss any questions or issues they may have. For direct help, please email us.

 
A shark. Not a loan shark. Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

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Former Labour leader Ed Miliband tells Jeremy Corbyn: "I would have gone"

Jeremy Corbyn's predecessor broke his long silence to say the leader's position was "untenable". 

The former Labour leader Ed Miliband has swung his weight behind the campaign to oust Jeremy Corbyn after describing his position as "untenable" and declared he would have resigned already.

His intervention is seen as significant, because since losing the general election in 2015, Miliband has taken a step back and refused to publicly criticise his successor. 

But the day after Labour MPs voted they had no confidence in Corbyn, the former leader has finally spoken. 

Miliband told BBC Radio 4's World at One that his position was "untenable". 

He said:

"We are at a time of acute national crisis, a crisis I haven't known in my political lifetime, probably the biggest crisis for the country since World War II.

"At that moment we in the Labour party need to think about the country.

"I've supported Jeremy Corbyn all the way along from the moment he was elected because I thought it was absolutely the right thing to do. A lot of what he stands for is very important. But I've relcutantly reached the conclusion that his position is untenable."

 

But with Corbyn already defying the opinion of most of his parliamentary colleagues, this alone is unlikely to have much effect. It's what Miliband says next that is crucial.

Corbyn has argued the vote of no confidence against him was unconstitutional. Miliband thinks otherwise. He said: "You are the leader of the Labour Party, the leader of the party in parliament and the leader of the party in the country. Some people are saying this is unconstitional. In our constitution it says if a fifth of MPs support another candidate there is another contest."

And he implied it should not even get to a leadership contest: "No doubt that will follow if Corbyn decides to stay. but the question then for him is what is the right thing for the country and the party and the causes he stands for."

Miliband also hit out at accusations of a conspiracy to oust Corbyn:

"I've never been called a Blairite. I'm not a plotter. I'm somone who cares deeply anpout this country, deeply about my party, deeply about the causes I think Jeremy and I care about. I think the best thing on all of those criteria is that he stands down."

Asked what he would have done in the same situation, he replied: "I would have gone.

"One of the reasons I'm speaking out is because of what people are saying about this proceess. If you look at the people saying Jeremy should go, it's not people on one wing of the Labour Party.

"I had my troubles with certain people in the Labour Party. Some of them ideological, some on other issues, but this is not ideological." Some of Corbyn's ideas could continue under a new leader, he suggested. 

Miliband shared his views just minutes after his former rival, the Prime Minister David Cameron, told Corbyn it was not in the national interest for him to remain as leader. "I would say, for heaven's sake man, go," he told the Opposition leader at Prime Minister's Questions. 

Although the Brexit vote was a devastating blow for the PM, the aftermath has unleashed equal waves of turmoil for the Labour Party.

Corbyn's refusal to resign sparked a series of resignations from the shadow cabinet. Unmoved, he replaced them. Meanwhile Momentum, Corbyn's grassroots political organisation, held a rally in support outside Parliament. 

On Tuesday, Labour MPs voted 172 to 40 in favour of a no confidence motion, which paves the way for a leadership challenge.

But Corbyn described the vote as unconstitutional and pledged he "would not betray" the Labour Pary members, who gave him a sweeping mandate in 2015.