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- Payday loans lender faces a wave of compensation claims that cost it £5.7 million in the second half of 2018
- Claims management companies raising claims without the knowledge of the customers in a bid to overwhelm lenders
- CMCs abusing part of the GDPR as they seek to get personal data to use for profits
Payday loan lenders have increasingly been facing a series of compensation claims and payouts in recent times. It comes after the Financial Conduct Authority ordered lenders to fast-track compensation of customers who were mis-sold unaffordable loans.
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Growing compensation claims cost payday loans lender Sunny £5.7m
The latest payday loan lender to face the new wave of compensation claims is online lender Sunny.co.uk. Elevate Credit International is the parent company that runs the payday loans lender that offers loans ranging from£100 to £2,500. Sunny offers loans at a rate of 1,266% annually, which includes some marketed, particularly for paying unanticipated energy charges.
Sunny is among the major payday lenders in the UK, claiming to control a fifth of the payday lending market. For instance, in 2018, the company reportedly handled over 104,000 new borrowers. The lender indicated that in the second half of last year, Elevate experienced an increase in complaints. Claims management companies (CMCs) introduced the claims regarding the affordability assessment of particular loans.
Also Read: How Much Will A Payday loan Cost Me?
As a result of these compensation claims, the company took a hit of around £5.7m in profits to approximately £78,244. The gains also suffered because of fluctuating exchange rates as well as investment in tech and new clients.
Elevate facing growing complaints
Payday loans body Consumer Finance Association (CFA) has raised concerns regarding the claims brought by CMCs. Some of the concerns include data protection concerns, poorly thought complaints, as well as complaints raised without customer knowledge.
According to a CFA spokeswoman, most of the CMCs are raising several complaints in a bid to overwhelm lenders. For instance, Elevate reported that in the second half of 2018, it had received over 2,500 complaints from CMCs. Most of the complaints raised by the CMCs were from people who were not Sunny customers.
One CMC brought 21 complaints against Elevate for customers who were not aware of the complaints. There were 204 such cases from CMCs already settled. Last month Charterhouse Claims submitted around 1,130 claims in three days with 259 of the claims unrelated to loans issued. In April, PayDay Refunds also submitted over 630 claims within three days, most of which had the permission of over six months.
CMCs misusing the parts if the new GDPR
Elevate has pointed out to CMCs using parts of the new GDPR to submit data subject access requests on behalf of customers. Some of the companies are making the DSARs without knowledge of the customer. The companies aim to gain valuable personal data that they can use for profits.
Payday loan lenders have faced increasing pressure from complaints after the FCA tightened lending regulations. In 2015 the regulator introduced a cap on payday loan fees following concerns that customers were mis-sold 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.