Payday loan brokers regularly raid bank accounts of poor customers
In Southern Ireland Credit Unions are a rural phenomenon and offer a wonderful antedate to sharp practice like that set out here. It really is time we dod more to significantly enhance the small scale borrowing available to those in need of personal finance at the very local level to avoid this kind of despicable practice. This story tells us:
A new breed of payday loan brokers are making as many as 1m attempts per month to raid the bank accounts of some of the poorest members of society.
The behaviour is provoking alarm at one of Britain’s biggest high street banks, Natwest, which says it is being inundated with complaints from its most vulnerable customers.
NatWest said it is seeing as many as 640 complaints a day from customers who say that sums, usually in the range of £50 to £75, have been taken from their accounts by companies they do not recognise but are in fact payday loan brokers.
The brokers are websites that promise to find loans, but are not lenders themselves. Often buried in the small print is a clause allowing the payday broker to charge £50 to £75 to find the person a loan – on top of an annual interest charge as high as 3,000%. In the worst cases, the site shares the person’s bank details with as many as 200 other companies, which then also attempt to levy charges against the individual.
The City regulator has received a dossier of information about the escalating problem, and the Financial Ombudsman Service also confirmed that it is facing a wave of complaints about the issue.
NatWest, which is owned by the Royal Bank of Scotland, gave as an example a 41-year-old shop assistant who took a payday loan of £100 at 2,216% interest. A month later she complained to NatWest after seeing a separate fee of £67.88 paid to My Loan Now and £67.95 to Loans Direct on her account, companies she said she had never dealt with.
The broker sites tell customers they need their bank account details to search for a loan, but then pass them on to as many as 200 other brokers and lenders, which then seek to extract fees, even if they have not supplied a loan. The small print allowing the site to pass on the details and demand payments can be hidden in the site’s ‘privacy policy’ or in small print at the bottom of the page.