Panorama on 17 June 2019 showed Easy Money, Tough Debt? It’s on iPlayer for 11 months if you missed it.
It covered a wide range of high cost borrowing, with stories from people who had problems with payday loans, with high-cost credit cards and catalogues, and guarantor loans, with a borrower and a guarantor being featured.
Everyday stories of high cost borrowing
For a debt adviser, these felt like typical clients we see, not extreme cases chosen to make entertaining TV.
People started borrowing with a good reason but were soon borrowing much more:
- one man’s payday loan problem started with £300 to cover a vet’s bill. He then extended that loan and when his income dropped took more loans. Soon he owed over £4,500 – as he said “it spiralled out of control very fast“;
- a single mum on benefits ended up with a £3,000 limit on catalogues which she described as her lifeline “even though you know it’s killing you“;
- a borrower described how she was struggling to make payments and asked Amigo for just an extra week or so, but her guarantor was contacted “my anxiety went through the roof,,, I wish I had never put my guarantor in this predicament“. So she struggled on making the repayments, and was then offered another top-up by Amigo, even though she had told Amigo she was in difficulty, as the screenshot below shows:
Are you trapped by this sort of expensive credit?
Caroline Wayman, the Chief Ombudsman at the Financial Ombudsman Service (FOS) talked about affordability complaints. These are best known for payday loans but also apply to other sorts of lending.
To be “affordable” you have to be able to repay the credit without hardship or having to borrow more money or get behind with bills.
Find out how to make an affordability complaint and how they work for different sorts of borrowing:
- payday loan refunds;
- doorstep lending refunds;
- large high-cost loans;
- guarantor loans if you are the borrower or if you are the guarantor;
- credit card and catalogues.
More regulation needed
Affordability complaints can help many people who have been harmed by high cost credit. But better regulation would stop so many people being harmed in future.
Some points that were mentioned in the program:
Stella Creasy MP said the payday loan cost cap – you can never pay more in interest than the amount you borrow – should be extended to other sorts of credit. I agree. This sort of cap should apply to credit card, catalogues and large high costs loans such as 118 Money, Avant Credit, Everyday Loans and also guarantor loans such as Amigo.
John Glen MP, a Treasury minister, said he had discussed guarantor loans with the Financial Conduct Authority (FCA) recently and the FCA is monitoring them. The FCA mentioned guarantor loans in their recent letter to high cost credit CEOs.
I think this needs to be done urgently because the guarantor loan market is getting a lot larger. Guarantor loans have some uniquely difficult characteristics for customers. They cause people a lot of stress through not wanting to harm their guarantor and Amigo is much faster to go to court than any other lender.
John Glen also mentioned the “breathing space” that is going to be introduced. Today, April 19th, the government has given more details: Individuals to be protected from ‘devastating impact’ of problem debt.
What the lenders said
FCA rules says lenders should learn from FOS decisions. QuickQuid were asked why they were not accepting so many Ombudsman decisions about affordability. QuickQuid blamed inconsistent FOS decisions.
But FOS has been making the same decisions about many aspects of QuickQuid’s poor lending practices for a long while, including:
- QQ should not refuse to consider refunds on loans over 6 years – in most cases people were unaware they could make a complaint until recently;
- QQ need to recognise the problems with long chains of loans – repeat lending for many months;
- QQ’s refusal to give refunds on post 2015 lending because they changed their checking in 2015 is wrong. Significant affordability problems have occurred with recent QuickQuid lending;
- QQ’s “balloon payment” 3 month loan product presents major affordability problems for many customers who cannot be expected to be able to save up money during the first 2 months to meet the large final payment.
Amigo said they were happy to talk to borrowers and guarantors about payment problems and never encouraged people to pay Amigo if that meant getting behind with essential bills.
That isn’t the experience of many Amigo borrowers and guarantors. The borrower on Panorama got behind with council tax, utilities, some mortgage arrears and took debt advice. When she talked to her creditors she says:
“they were all pretty helpful, everyone was, bar Amigo.“