Could some instant cash loan providers be guilty of mis-selling?

According to a legal expert formerly with the Financial Ombudsman Service, some providers of short term loans online could be mis-selling their services to customers.

Thompson Snell & Passmore associate, James Ward, recently remarked that the instant cash loans industry needs to be properly regulated in order to prevent a ‘deluge of complaints’ due to lenders failing to act in an ethical manner or failing to provide borrowers adequate information. The current legislation regulating the payday advance sector is simply inadequate, Mr Ward added, especially with lenders who provide cash instantly, as this leaves no time for an assessment as to whether the borrower will be able to repay the loan without risking spiraling into debt – something that is a nigh impossibility without a face-to-face meeting with the borrower.

Vulnerable consumers in desperate situations will undoubtedly tick every box they need to in order to get one of these lenders to fork over the cash, and without bothering to read the fine print, Mr Ward also said, which means the likelihood that these desperate borrowers will fully understand what they’re getting themselves into is quite low.    These instant cash loans, targeted towards people who need an extra bit of cash for only a few days, are already expensive enough to repay, according to the legal expert, as some charge APR interest rates of s high as 5,000 per cent.

However, the payday advance lending industry has taken issue with the broad brush in which it has been painted, especially since taking out such a loan can oftentimes be much less expensive than using an unauthorised overdraft at your local retail branch, especially once daily interest and penalty charges are levied.  High street lenders have fired back, stating that they would ensure a borrower can make their repayments before extending them credit, though detractors have pointed to low lending limits met by Government-funded initiatives such as Project Merlin, accusing traditional loan providers from not stepping up to meet demand.

© 2018 All rights reserved. Reproduction in whole or in part without permission is prohibited. See our copyright rules.

What do you think?

Please note that email addresses are not visible on approved comments.