Payday Loan Scams Uncovered By Which Magazine

An undercover investigation by the Which? consumer watchdog magazine has uncovered breaches of the Consumer Credit Act, poor website security, poor practice and inflated APR throughout the Payday loans industry.

They have even gone as far as to report a couple of payday lenders to the Office of Fair Trading. Which? says SwiftMoney are in breach of regulations by not displaying the APR anywhere on their web site whilst Payday Kong seems to be operating without a valid credit licence.

The undercover investigator found many lenders using poor practice including several who tried to convince him to borrow more than he actually applied for and others who offered to roll over the loan (thereby doubling the interest charge) into another month when it came time to settle the debt. The report also said several payday web sites had poor security and one asked customers to enter their bank details into a form that was not on a secure page.

The report, published today on Director of Finance Online says:

Payday loan providers typically charge from £20 to £35 for a one month £100 loan. The most expensive Which? found was offered by Wonga.com, which quoted £36.72 for a 30-day loan of £100 – equivalent to an APR of 4,394%. The same amount borrowed through an authorised overdraft from Which? recommended provider Co-operative Bank would cost just £1.35 – Read the report here.

Which? also reported Casheuronet UK to the Information Commissioners Office (the ICO) for breach of privacy. The undercover investigator received a number of unsolicited phone calls and emails from third parties after his personal information appears to have been sold on to other companies after he filled out a payday loan application on their website. This was despite the fact he went so far as to actually ask the lender to confirm his details and privacy would be kept private and was assured they would be.

Payday Loans Advice welcome these type of investigations and agree regulators need to ensure consumers are protected from unscrupulous lenders by revealing any payday loan scams they find but they also need to be aware that payday loans fill a need in the market for short term emergency loans and there are genuine lenders out there that are meeting those needs.

While it may be true a £100 overdraft with the Co-op bank costs just £1.35, other banks and building societies charge far more than the cost of a £100 payday loan. Lloyds TSB for instance will charge customers £20 per day for an unauthorised £100 overdraft for up to 10 days so that £100 just cost a total of £300 for less than a fortnight while a payday loan with QuickQuid would cost around £20 for the full month.

If you are looking for a short term loan always compare payday loans carefully to find the best deals. Never borrow more than you can pay back on your next payday and only use them to get out of a financial emergency such as avoiding an overdraft charge, a late payment penalty, preventing a utility from being cut off etc.

You can compare the top lenders by clicking here

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Payday Loan Scams Uncovered By Which Magazine

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