The Office of Fair Trading is cracking down on short term loans companies using the Internet to flout laws and guidelines, designed to protect the customers they are attracting, by using dubious advertising about the affordability of their products, especially in respect to the charges and methods of payback that the short-term loan companies operate.
New customers who are not altogether clear about what’s expected of them when they apply for quick cash loans through the direct advertising campaigns, which in some instances has seen ‘calls to action’ being sent to their mobiles as SMS messages, are finding themselves with charges or repayments that were way over and above what was represented on screen.
The punishment for the loan companies can be as severe as having their consumer credit licenses revoked if they cannot prove they are able to change the manner in which they operate.
Although they have not been named, it is believed that fifty instant cash loan companies are having their websites checked for misleading advertising which not only do their best to hide the charges but do not explain the lengths the cash advance lenders will go to to get their money back on the agreed date, which you have to agree to in order to be eligible for the loan.
Complaints to Consumer Direct more than doubled in 2011
An investigation into the amount of complaints arising from such activities was presented to MPs shortly before Christmas, which saw disgruntled customers complaints about online loan specialists rise from 700 in total in 2010 to over 1,500 by November of 2011; with the industry reputedly worth £2bn per annum, that figure is still comparatively small.
Practises need tightening up or outlining more clearly by instant cash loan organisations.
Some of the more worrying aspects of the way repayments are collected, such as being able to draw money from a client’s account even if they are already over their arranged overdraft limit, are also to be looked into. Roll-over loans, which, if not curbed, can result in real financial difficulty for the individual who gets reliant on the quick cash injection before realising it’s a never ending spiral of debt, will also come under scrutiny.
The practise of offering to show potential customers their credit score if they take out a loan is also on the agenda. One company who charged £60 for the privilege but did not state the charge at the time of enquiry has been told to get its act together or face further action, which could possibly mean their credit license as a instant cash loan lender could be stripped if they fail to do so.