This page brings together news items about various types of high-cost lending in Britain, including payday loans, guarantor loans, doorstep lending, logbook loans, rent to own and other forms of high-cost credit.
In December 2018 the FCA has responded to consultation responses on high cost credit and overdrafts. Good to see a major change to what they are proposing for BNPL deals, see below. Also welcome is the statement that:
As we finish tackling these areas of harm, we may turn to other areas of the high-cost credit market, for example logbook and guarantor loans, to assess the extent of any harm.
Dec 2018 FOS says they now expect to receive 50,000 complaints about payday loans and other HCST lending in this financial year, having originally projected 20,000.
Oct 2018 Wonga administrators send Proposal for the administration to creditors. See Wonga – how the administrators plan to deal with complaints.
- Elevate Q3 results – Sunny’s US parent reported net loss for quarter of $4.2m. Sunny complaint costs $3m. They were not a larger lender before 2014 so expect other lenders to be harder hit by complaint costs and to go out of business.
- Enova Q3 results – QuickQuid’s US parent reported UK lending and profits up sharply and no warnings about the cost of redress;
- Curo Q3 results – Wageday Advance’s US parent said of its UK operations: “[redress] costs totaled$4.0 million. After careful consideration, we do not believe that, given the scale of our U.K. operations, we can sustain claims at this level and may not be able to continue viable U.K. business operations without action by the U.K. business to reduce the risk of claims relating to historic lending”
Oct 2018 FCA sends a Dear CEO letter to High Cost Short Term firms. It is a great start to effectively enforcing DISP in my opinion, see Dear Payday Lender CEO – should you start a redress program?.
Oct 2018 FOS publishes two decisions in the technical section, both saying it can look at payday loans over 6 years old as the customer in each case had complained within 3 years of realising they could. A subsequent reply from QUickQuid to a customer ignores this – see QuickQuid – misleading customers about loans over 6 years old.
Sep 2018 FOS statistics show QuickQuid has become the most complained about consumer credit lender (excludes PPI). FT: The UK’s largest remaining payday lender spent more money dealing with complaints in the first half of the year than it made in profits.
Aug 2018 Wonga goes into administration. The administrators say it is highly unlikely that customers will get paid the full amount of their refunds.
Aug 2018 The Money Shop stops lending – announcement on their website.
Jun 2018 The Financial Ombudsman’s annual review of 2017-8 shows payday loan complaints have continued to increase:
- 2015/16 3,168
- 2016/17 10,529
- 2017/18 17,256.
There is still a very high uphold rate: 61% is higher than any other type of complaint the ombudsman gets. FOS says:
from what we’ve seen, lenders still have a way to go in doing the right thing – both at the point they’re deciding to lend money, and at the point their customers complain.
Feb 2018 QuickQuid’s parent’s annual results Enova Annual report 2017. A couple of excerpts:
In the United Kingdom, we believe that our principal online competitors include 118 118 Money, Amigo, Avant, Lending Stream, Mr. Lender, PaydayUK, Satsuma, Elevate [aka Sunny] and Wonga.
We have experienced an increased volume of complaints about loans issued prior to changes we implemented in 2014, and the FOS has taken a very consumer friendly approach to its complaint handling process and in dispute resolutions. We have been required to make significant payments to customers to resolve these complaints. If the FOS continues to issue findings in favor of consumers, and we are required to continue to make significant payments to resolve the complaints, such findings could have a material adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Sept 2017 Cheque Centre goes into administration The firm once had more than 300 high street branches but last year closed its remaining outlets to focus on trading over the internet under the Square Today brand.
Aug 2017 FCA finds its payday controls, including the price cap, have delivered substantial benefits for consumers. The cap will be retained at the current level and reviewed in the next three years.
Jul 2017 BCCA merges with the beleaguered CFA CFA is the lobbying body for payday lenders.
May 2017 Comparison Websites – payday lenders now have to advertise and link to at least one of them. A pretty pointless idea from the CMA.
Apr 2017 Major loss of customer data by Wonga.
Apr 2017 CFO Lending goes into administration – affecting hundreds, possibly thousands, of people who may not receive the refunds they have been promised.
Mar 2017 Elevate, which owns the Sunny brand, has resurrected its IPO. A few bits from its Preliminary Prospectus:
- $86m of the $87-107m being raised is to refinance expensive loan debt [oh the irony];
- p116 shows the UK demographic Sunny targets is considerably poorer than their US borrowers.
Jan 2019 ASA rules that a Provident Xmas advert was irresponsible and targetted vulnerable customers.
Aug 2018 Embarrassing statements from Provident’s former MD of home credit Collection in his unfair dismissal tribunal case: Hush money: Provident Financial accused of helping customers to hide debts from spouses. The firm also signed up customers to tiny loan deals they did not need and could repay – a practice known as ‘pot busting’.
Jun 2018 FCA’s High Cost Credit review rejects the idea of a price cap but it wants to stop agents from offering new loans or refinancing unless this has been requested by the customer. It thinks offers of new loans not made after a signed written request made on a previous occasion may breach the Consumer Credit Act 1974 Section 49. It says this applies to existing customers as well as new customers and there are draft new CONC rules to clarify this – a consultation has been started on these.
Jun 2018 Financial Ombudsman reports a sharp increase in the number of complaints about doorstep lending in 2017/18 but the numbers are still small, just 808.
Aug 2017 following a profits warning in July, there was a second profits warning from Provident – the doorstep loans reorganisation has resulted in both collections rates and new loans dropping dramatically.
Jun 2017 Provident warned that reorganising its business now expected to halve profits this year from its consumer credit divisions, down to £60m, from £115m in 2016.
Feb 2017 New Citizens Advice report Debt on Your Doorstep:
Doorstep loans are the largest high-cost credit market in the UK and are used by over 1.3 million customers… The doorstep loan market needs better regulation, including stronger rules on affordability checks and restrictions on loan refinancing.
Jul 2018 Times article: Billion-pound loan firm Amigo accused of bending rules to exploit vulnerable
Jun 2018 Amigo is planning a London stock market flotation, which will be interesting as we will be able to see a lot about its finances. From the news story: Loan book up £143m pa to £470m pa in last 4 financial years. Adjusted profit after tax up £46m (2016 financial year) to £72m (2018 financial year).
It floated successfully on 29 June: Sub-prime lender Amigo valued at 1.3 billion pounds in London IPO.
Aug 2017 Non Standard Finance PLC has acquired George Banco. When added to NSF’s TrustTwo brand, this makes them the second largest guarantor lender behind Amigo.
Jan 2017 The FCA announced new guidance on informing guarantors before payments are taken.
May 2018 Government scraps the proposed Good Mortgage Bill even though it had all-party support. So I now think that the FCA needs to take action on logbook loans urgently.
Jun 2017 Queen’s speech: Proposal to scrap the Victorian-era Bills of Sale Acts and replace with a new Goods Mortgage Bill.
Feb 2017 The government agreed to support the Law Commission’s proposed reforms to logbook lending.
Rent to own
Jun 2018 FCA’s High Cost Credit review targets Rent To Own as the only form of lending it is proposing a new cap for:
RTO users are paying an average premium of 3 or 4 times the typical retail price of goods. At the extreme, this can be nearly 5 or 6 times.
It is consulting on how this can be achieved, aiming for April 2019, but pointing out it isn’t as simple as the payday loan cap as the mark up on the typical retail price also has to be considered. Unsurprisingly Brighthouse thinks there should be a longer timeframe.
My response to the FCA’s discussion questions about a price cap for RTO is here.
Feb 2018 Brighthouse CEO gives evidence to Treasury Select Committee – only 50% of contracts complete, full returns at any time and no repossessions. Wow – see my article on this: BrightHouse and the return of the never-never.
Oct 2017 FCA makes BrightHouse refund millions to customers. But I think more people should get a BrightHouse refund, see template letter here.
Feb 2017 Brighthouse is struggling with tighter regulation and proposing to close 28 stores:
Temporary [FCA] rules mean that BrightHouse must carry out more stringent checks on the credit history of its customers and is not allowed to charge them for late payments. In October, the business admitted that the affordability checks were damaging its business model and hurting profits.
Dec 2018 FCA ducks topic of a price cap in favour of a raft of measures to simplify overdraft pricing and prevent higher charges for unauthorised overdrafts
Jun 2018 Another year on, the FCA’s latest High Cost Credit review mentions several radical options (make charging for unauthorised overdrafts the same as for arranged overdrafts? banning fees in favour of a simple APR charge?) but decides to have more consultations as part of a wider banking review. Disappointing to say the least because of the volume of evidence of consumer harm the report details.
Aug 2017 FCA is blunt in its HCST credit review:
the nature and extent of the problems that we have found with unarranged overdrafts mean that maintaining the status quo is not an option. We are now working to resolve these issues while preserving the parts of the market that consumers find useful.
Jul 2017 Lloyds overhauls its overdraft charging
Catalogues and store cards
Dec 2018 Excellent news that the FCA has beefed up its previously feeble proposals for lenders to provide more information about BNPL deals by proposing that firms cannot backdate interest on amounts that have been repaid during the 0% period.
Jun 2018 The FCA is proposing to include catalogues and store cards in the persistent credit card debt rules introduced earlier in the year.
Dec 2016 Citizens Advice report found that backdated interest payments are leaving young people with unexpected bills from “buy now, pay later” deals from catalogues.
Dec 2017 FCA announces investigation into Moneybarn, Provident’s subprime car finance arm. In early 2019 Provident was expecting this to conclude in the next few months,
Aug 2017 The FCA has published a page setting out its current work on car finance.
Jul 2017 The Car Finance Company which specialises in sub-prime lending for HP and PCP is in trouble:
latest accounts showed that the proportion of arrears had more than doubled to 18.4 per cent in 2016 from 8.2 per cent a year earlier. Impairments rose by 371 per cent year-on-year to £11.6 million, pushing the company to a £17.8 million loss, after a profit of £400,000 in 2015. The company blamed a new telephone system for its problems but said that the business could still work. [Poor excuse of the year?]
Other high cost lending
Oct 2018 Chancellor announced a feasibility study into a pilot on a No Interest Loan Scheme in Budget and other small measures to help social lending sector – well it’s a start!
Oct 2018 Vanquis says it has refunded c 300,000 customers and the refunds are “on-track to be substantially completed in early 2019” – the FCA notice said they should be complete by end February 2019.
Jul 2018 Vanquis at last publishes an example of how it is calculating the refunds – and there are two major problems with what they are doing which explain why the refunds look too small.
May 2018 Vanquis announces a delay to ROP refunds. Also (unrelated) Vanquis starts telling customers that it is raising minimum monthly payments from July in response to the FCA’s persistent credit card changes.
Feb 2018 FCA announces new rules for persistent credit card debt.
Feb 2018 FCA orders fine for Vanquis’s ROP mis-selling and £168million refund to customers. See my article.
Mar 2017 118 Money gets full authorisation from the FCA. With a 99.9% Representative Credit rate, lending £1000 – £5000 for 1-2 years these loans are hugely expensive. People that get one to clear payday loans, for example, frequently go on to struggle with this unaffordable consolidation.
This page is kept up to date – most recent update: October 2018