Making a complaint about a payday loan lender?

Summary: This article explains how an individual can make a complaint against a payday loan lender, and some of the reasons when a complaint can be made.

Pay day loans are so called as they provide a short term loan to an individual, usually for a relatively low amount, to tide them over until payday. They are generally quite easy to get, even with a poor credit rating, but tend to have extremely high charges and interest rates, which increase rapidly if not repaid within the agreed time.

Why might I complain about a payday loan lender?

The majority of lenders must follow a good practice charter, which states they must advise the customer of the following:

• how much the total cost of the loan will be, including examples
• exactly when the money must be repaid
• that payday loans should not be used for long term borrowing
• how to make a complaint
• how repayments are made, including an explanation of Continuous Payment Authority (CPA) and how to cancel it

Furthermore, the lender must carry out the proper checks to ensure that the potential customer is in a position to be able to repay the loan. Should the individual find themselves struggling to repay the loan, the lender should deal with the matter in a sympathetic and positive way and offer to freeze interest and charges if payments are able to be made under a reasonable repayment plan. It is also worth noting that they should also provide details of free debt counselling organisations and explain the risks of extending the loan along with a breakdown of additional costs. As a general rule, if the lender has not adhered to the above, there could be grounds for a complaint to be made.

How do I make a complaint?

Complain to the lender directly

In the first instance, the individual should write a letter to the lender, outlining their grievance. An example of such a letter can be found on the Citizens Advice Bureau website in the payday loans section. The letter should be specific to the individual and state any reasons it is believed the lender has not adhered to the Charter of Good Practice.

Complain to the Financial Ombudsman

Should this letter not result in a satisfactory outcome, the complaint can be escalated to the Financial Ombudsman. Details of how to complain can be found on their website It is important to note that the lender usually has 8 weeks to sort out the problem before the complaint can be escalated.

Complain to a trade association

Most payday loan lenders will be a member of a union, details of which should be found on any correspondence from the lender. The Union usually expects its members to adhere to the charter of good practice. As well as writing to the financial ombudsman, it may be worth first sending a copy of the complaint to the union as they may be able advise on the situation.

Take the lender to court

If the decision of the financial ombudsman is unsatisfactory, it may be possible to take the lender to court. However, this could be costly and there is no guarantee of winning the case.