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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A global marketplace: the internet represents exporting’s biggest opportunity

The advent of the internet age has made the whole world a single marketplace. Selling goods online through digital means offers British businesses huge opportunities for international growth. The UK was one of the earliest adopters of online retail platforms, and UK online sales revenues are growing at around 20 per cent each year, not just driving wider economic growth, but promoting the British brand to an enthusiastic audience.

Global e-commerce turnover grew at a similar rate in 2014-15 to over $2.2trln. The Asia-Pacific region, for example, is embracing e-marketplaces with 28 per cent growth in 2015 to over $1trln of sales. This demonstrates the massive opportunities for UK exporters to sell their goods more easily to the world’s largest consumer markets. My department, the Department for International Trade, is committed to being a leader in promoting these opportunities. We are supporting UK businesses in identifying these markets, and are providing access to services and support to exploit this dramatic growth in digital commerce.

With the UK leading innovation, it is one of the responsibilities of government to demonstrate just what can be done. My department is investing more in digital services to reach and support many more businesses, and last November we launched our new digital trade hub: www.great.gov.uk. Working with partners such as Lloyds Banking Group, the new site will make it easier for UK businesses to access overseas business opportunities and to take those first steps to exporting.

The ‘Selling Online Overseas Tool’ within the hub was launched in collaboration with 37 e-marketplaces including Amazon and Rakuten, who collectively represent over 2bn online consumers across the globe. The first government service of its kind, the tool allows UK exporters to apply to some of the world’s leading overseas e-marketplaces in order to sell their products to customers they otherwise would not have reached. Companies can also access thousands of pounds’ worth of discounts, including waived commission and special marketing packages, created exclusively for Department for International Trade clients and the e-exporting programme team plans to deliver additional online promotions with some of the world’s leading e-marketplaces across priority markets.

We are also working with over 50 private sector partners to promote our Exporting is GREAT campaign, and to support the development and launch of our digital trade platform. The government’s Exporting is GREAT campaign is targeting potential partners across the world as our export trade hub launches in key international markets to open direct export opportunities for UK businesses. Overseas buyers will now be able to access our new ‘Find a Supplier’ service on the website which will match them with exporters across the UK who have created profiles and will be able to meet their needs.

With Lloyds in particular we are pleased that our partnership last year helped over 6,000 UK businesses to start trading overseas, and are proud of our association with the International Trade Portal. Digital marketplaces have revolutionised retail in the UK, and are now connecting consumers across the world. UK businesses need to seize this opportunity to offer their products to potentially billions of buyers and we, along with partners like Lloyds, will do all we can to help them do just that.

Taken from the New Statesman roundtable supplement Going Digital, Going Global: How digital skills can help any business trade internationally

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