Payday loan brokers, or middlemen, are taking advantage of low income earners by offering to get them the cheapest deal then taking fees of up to £700 from their bank accounts, according to NatWest.
The bank says in one month alone, payday loan brokers made more than 1 million attempts to remove money from its customers' accounts, with the lender receiving more than 650 calls per day from customers who'd been affected.
Credit brokers typically promote themselves as providing a service to help borrowers get a cheap loan; they often ask them for card details and then charge a broker fee, usually around £70, often without ever securing a loan for the customer. (See our Payday Loans guide for alternatives if you're struggling.)
Many customers are unaware they are even using a broker as the sites appear to be offering the loans themselves, and most don't realise their information is being passed on to multiple third parties who will debit their account.
Terry Lawson, head of fraud and chargebacks at RBS and NatWest, says: "We've seen large numbers of customers incurring charges they don't expect when using a payday loan broker since July this year. Customers' account or debit card details are gathered and sent on to up to 200 other brokers and lenders who charge them fees for a loan application.
NatWest says most of the customers targeted by the brokers are those aged 18-40 on low incomes. In one case, it says a customer's details were passed to 10 brokers and between them, they debited the account £700.
Complaints to the Ombudsman on the rise
The statistics from NatWest come alongside today's fresh warning about payday loan brokers from the Financial Ombudsman, which says complaints about such lenders have more than tripled over the past six months.
The number of complaints received by the adjudicator has soared to 11,405 between 1 April 2014 and 30 September 2014, more than double the number of complaints received for the whole of the previous twelve months.
It received 6,375 complaints between 1 April 2013 and 31 March 2014 and in two-thirds of those it investigated, the Ombudsman agreed that customers had been treated unfairly and it found in the customer's favour.
The Ombudsman had previously warned about this problem in August. (see the Complaints about 'payday loan middlemen' soar MSE news story).
Senior ombudsman Juliana Francis says: "It's disappointing to see that more and more people are being misled into thinking that these credit broking websites will get them a loan.
"In too many of the cases we sort out, no loan is provided and people's bank accounts have been charged a high fee, often multiple times.
"If money has been taken from your account unfairly or without warning, the good news is the Ombudsman is here to help. Give us a call and we'll help you quickly get things sorted."
To get in touch with the Ombudsman, consumers can call 0800 023 4567 from a landline or 0300 123 9123 from a mobile phone.
Money debited, but loans not materialising
Complaints to the Ombudsman include:
- Money being drained from accounts by the middleman, often without permission.
- Borrowers not receiving the loan they were after – either because they found a better rate elsewhere or because loans didn't materialise as companies weren't regulated or were bogus.
- People using these websites thought they were applying for a loan directly and didn't realise they were paying a middleman for a loan.
In the majority of cases, after the brokers were contacted by the Ombudsman, customers were refunded the cash that had been taken.
Additional reporting by Joanne Christie