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13/01/2014
Payday Lenders Act Unlawfully - Which?
Following a new Which? investigation, the firm believes that payday lenders are acting unlawfully by charging excessive default fees.
Ten of the 17 leading payday lenders Which? looked at have default fees of £20 or more, and four charge £25 and above, with Wonga topping the table at £30.
High charges are one of the biggest factors that tip borrowers into a spiral of debt. Previous Which? research found that more than half (56%) of payday loan users had incurred charges for missed or bounced repayments over 12 months, compared to 16% for all credit users.
Which? believes that excessive default fees are unlawful under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), which state that it is unfair for lenders to charge a disproportionately high fee if borrowers default on a loan.
Which? are calling for the Financial Conduct Authority (FCA) to introduce a cap on the level that firms can charge in default fees, as part of the cap on the total cost of credit planned for January 2015.
Richard Lloyd, executive director at Which? said: "We believe payday lenders are exploiting borrowers with excessive fees which can push them even further into debt. If they cannot justify why these charges are so high and refuse to cut them, we would look to take further steps to protect vulnerable consumers. The regulator must also take action to ensure all fees are fair, proportionate and only reflect lenders' costs."
(CD/IT)
Ten of the 17 leading payday lenders Which? looked at have default fees of £20 or more, and four charge £25 and above, with Wonga topping the table at £30.
High charges are one of the biggest factors that tip borrowers into a spiral of debt. Previous Which? research found that more than half (56%) of payday loan users had incurred charges for missed or bounced repayments over 12 months, compared to 16% for all credit users.
Which? believes that excessive default fees are unlawful under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), which state that it is unfair for lenders to charge a disproportionately high fee if borrowers default on a loan.
Which? are calling for the Financial Conduct Authority (FCA) to introduce a cap on the level that firms can charge in default fees, as part of the cap on the total cost of credit planned for January 2015.
Richard Lloyd, executive director at Which? said: "We believe payday lenders are exploiting borrowers with excessive fees which can push them even further into debt. If they cannot justify why these charges are so high and refuse to cut them, we would look to take further steps to protect vulnerable consumers. The regulator must also take action to ensure all fees are fair, proportionate and only reflect lenders' costs."
(CD/IT)
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