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- Payday loans lender PiggyBank collapses leaving 45,000 customers in financial uncertainty
- FCA raised concerns regarding the lender’s affordability checks
- PiggyBank’s parent company DJS placed in administration under HJS
PiggyBank is the latest payday loan lender to collapse, leaving over 45,000 customers in financial uncertainty. In recent weeks some payday loan lenders have closed shop as the City regulator tightens regulations.
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Payday loans lender PiggyBank collapses
The Financial Conduct Authority stopped the payday loan lender from trading in July on concerns of inadequate affordability checks. Short term creditors have been facing increasing scrutiny regarding the affordability of their loans. Recently QuickQuid went bust after it was overwhelmed with customer claims and complaints. The payday lenders who charge interest of up to 390% have been receiving criticism for selling customers unaffordable loans.
PiggyBank found itself in a similar situation where there were questions regarding the affordability of their loans. The FCA forced PiggyBank to assess to ensure they are lending customers who can repay the loans. The lender provided online payday loans of up to $1500 at an interest rate of 0.8% per day. As a result, the borrower could pay an annual percentage rate ranging from 1,225% to 1,698%.
PiggyBank’s parent company placed in administration
PiggyBank is one of the top ten largest payday loan lenders in the UK. Its parent company DJS has been placed in administration, and HJS appointed to conduct the administration. Administrators have not given the details has to what the company collapsed. It is, however, possible that some of the high net worth financiers of the lender might have pulled out. Following the suspension in July last year, it seems they were not ready to put more funds to the company.
In a statement, the company indicated that it had stopped new lending, but current borrowers should continue repaying their loans. Similarly, the lender warned the customer against making payments to any different bank account. If approached to make payments to a different account, one should contact the PiggyBank customer service team.
Customers have lodged compensation claims regarding the affordability of the loans PiggyBank provided. However, it is not clear how much they will receive after the company went into administration. The company has indicated that it expects an orderly wind-down of its business, which may include selling its assets.
Stricter FCA regulations sending lenders out of business
In 2014 the FCA imposed affordability checks on lenders and capped loan charges. It was in a bid to stop the exorbitant interest and fees they charge on the amount borrowed. As a result of the tightening of regulations, several payday loan lenders have found it difficult to survive.
Following the stricter regulations, CashEuroNet closed shop in October and took its brands On Stride and QuickQuid off the market. Another payday loan lender 247MoneyBox also went into administration weeks later. Most of these companies are collapsing following a surge of compensation claims from borrowers claiming they mis-sold them unaffordable loans.
Rebecca White is chief editor at CreditRaters.com. Rebecca has an extensive amount of knowledge on financial subjects including short-term loans & debt consolidation in the UK and USA. Rebecca has wrote for many publishers such as Debt Secret, My Money, VL and more.