Loan Industry Continues To Be Murky

The loan market is full of potholes. A new-look Consumer Credit Act was introduced with high hopes but the stink of harassment and poor services continues. In April this year the Act had been introduced to allow borrowers to the Financial Ombudsman Service but enforcement has not been strict as yet.

The plight of one family with four children can be taken as an example. During the last 8 years their 5,500-pound debt skyrocketed to 50,000 thanks to clever handling of their lender – Paragon. Repayments were disrupted when due to an oversight the husband’s salary cheques failed to be entered in his bank account. Paragon seized this opportunity to pile penalties upon him at a time when he was out of station and his wife did not open his mail. As the debt grew the lender became objectionably abusive. Paragon evaded giving details of the increasing loan amount and threatened to take over the house although the loan was unsecured. The stress caused the wife to suffer a miscarriage. The family could not be helped because their case is prior to the date when action started being taken by ombudsman services. They have contacted the Office of Fair Trading but the latter is not concerned with individual cases. Paragon tries to cover up by talking about communication gap.

National Debtline Charity says that this is only one of the many cases being reported despite the brouhaha of the Act. Since the first week of April 2007, the Financial Ombudsman Service (FOS) has been dealing with rising complaints triggered off by enhanced interest rates from August 2006. Out of 60 complaints received so far, 8 have been sent for being redressed.

The borrower should immediately negotiate with the lender at the first sign of trouble. Freed advice is available from National Debtline, Citizens Advice, OFT and Consumer Credit Counselling Service. The FOS too mediates between the two parties apart from investigating reports against unsecured debt lenders and credit brokers. Complainants are entitled to get a response within eight weeks. The FOS can also impose upon the lender to make good financial loss suffered by the borrower. There is growing pressure for business to run on proper tracks.

Unfortunately complaints continue to rise with one organization reporting 6,600 calls in a single day. Bankruptcy has gone up by 50%. The accusing finger points to interest rise since August 2006.

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