More transparency needed in the lending sector –

A startup founder called for more transparency in the rapidly changing loan claims space. In recent years, thousands of people who have taken on high cost payday loans, guarantor loans and other loans have been able to claim thousands of pounds on old loans they could not afford. While UK lenders are required to carry out sufficient checks by the Financial Conduct Authority, there are a number of clients who slip through the net due to lack of employment, income, poor creditworthiness or a huge backlog of debts already. Subsequently, if a client took on a high cost loan and had trouble repaying, needed new loans, is in arrears with payment, and pays extra fees, they would be a good candidate to receive heavy compensation. . For any UK lender, this is an expensive process. Not only do they potentially pay off the client’s entire loan, interest and some additional compensation, but all complaints investigated by the Financial Ombudsman incur an administration fee of £ 500 whether the claim is successful or not. This huge wave of claims in the loan industry has taken huge losses, including the administration of well-known names like The Money Shop, Wonga, and QuickQuid in recent years. More recently, Amigo Loans of the Guarantor Space took legal action with the Financial Conduct Authority in an attempt to avoid insolvency by offering a 5-10% reparation scheme to former clients who made a claim. As long as the trial continues, it is unlikely that Amigo will be able to make the payment of such a small amount. A startup founder, Dan Kettle, of the Pheabs loan connection service, has raised concerns. “I think we may have a flawed market right now in the lending industry,” he explains. “On the one hand, anyone can legally set up a loan company and offer loans, but any customer can also request repayment and receive additional compensation and the maintenance rates are very high. Thus, creating a very difficult environment in which to operate. “At this rate, lender after lender is falling under administration and it’s alarming, especially when short-term loans are a key poverty reduction measure. Without lenders, where will people go if they need to borrow a few hundred pounds? “It certainly calls for more transparency in the industry, in terms of what you can and can’t lend to – and it will create a much more secure and scalable business model for lenders and their clients.”

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