Caroline Wayman, the Chief Ombudsman at the Financial Ombudsman Service (FOS) gave evidence to the House of Commons Treasury Select Committee on 22 January 2019.
Here I am just picking out some of her remarks which are relevant to payday loan affordability complaints.
Wayman talked about “the unprecedented growth” in FOS complaints about payday lenders this year. This was detailed in FOS’s Strategy, Plans and Budget 2019/20 document in December:
A whistleblower had sent the Committee information saying there were 30,000 cases waiting to be allocated to an adjudicator and 8,000 cases waiting for an ombudsman-level decision. I think these referred to all general (ie not PPI) cases, not specifically payday loan cases.
Wayman said she thought they were roughly accurate but 3,000 of the 8,000 cases waiting for an Ombudsman decision were already being looked at by an Ombudsman.
Update: the Ombudsman’s final figures for 2018/19 showed that they received 40,000 complaints. See Payday lenders tired of having to pay so many refunds – unsurprising!
FOS’s approach to these large numbers of cases
Wayman emphasised that the answer to these high volumes was not simply to recruit more staff. She talked about “reducing demand in the right way” by getting payday lenders to apply the FOS approach to determining these complaints. This should prevent FOS being sent the sorts of clear cut cases it should not have to make a decision on.
This is also the approach the FCA advocated in its Dear CEO letter in October 2018.
Wayman acknowledged that it was important people had a result in a reasonable amount of time and said that they tried to prioritise vulnerable customers.
I would have liked her to be asked questions about why some payday loan cases are being allowed to drag on for very prolonged periods. For example, FOS has made clear rulings on the 6-year issue but so far QuickQuid appears to be ignoring these decisions.
Will these numbers continue?
In their proposed budget, FOS is planning for another 50,000 short term lending cases in 2019/20. Wayman said to the Committee
We don’t know how long [payday loan complaints] will persist as a major source of casework for us. Not least because some of the payday lenders are having difficulty in terms of their own solvency.
That last sentence was picked up and reported by Reuters. Although that sounds worrying for people waiting for decisions about their payday loan refunds, it may just reflect a general concern rather than knowledge of problems at some specific lenders.
Lenders were reminded by the FCA in the Dear CEO letter that:
We expect firms to make appropriate provision for any remediation which may be required, including associated costs (for example, fees to the Ombudsman). If doing so calls into question your firm’s ability both now and in the future to meet its financial commitments as they fall due, you must notify the FCA immediately.
The only lender that I know is in discussion with the FCA and FOS because of the cost of these complaints is Wageday Advance, which announced this in October. [Update – Wageday Advance asked the FCA for a Scheme of Arrangement in January 2019 but then when into Administration when the FCA did not agree to the Scheme.]