Everything you need to know about Payday loans

In the first six month of 2016, complaints to the Financial Ombudsman about payday loans more than tripled to 4,186 compared to the previous six months. The Financial Ombudsman has said this is because borrowers have become more aware of their rights.

Debt camel guest post on The Complaining Cow

 

I don’t think many people understand their rights in this area, so I asked Sara Williams, who runs the Debt Camel advice website and who is also a Citizens Advice advisor, to explain what these complaints were about and what to do about them!

What is a payday loan?
A payday loan is very short term loan at a high rate of interest. A typical example is if you borrow £200 to be repaid the next time you are paid – hence the name “payday loans”. The interest rates on these loans can often be over 1,000% APR.  Sometimes the repayments can be spread over a few months.

The regulator says loans should be “affordable”
You might think that at those interest rates the loans obviously aren’t affordable, but the regulator’s definition looks at whether someone can afford to repay the loan without experiencing adverse consequences.

In other words, affordable credit can be repaid on time and still leave you able to pay all your bills and cover your normal household expenditure. If the only way you could repay a payday loan is by borrowing again, perhaps from the same lender, or by getting into more debt with another lender, or not paying the rent or a utility bills, that payday loan was not affordable.

These affordability rules have applied for a long while. The Financial Conduct Authority (FCA) introduced tighter rules for payday lending since 2014, including capping the interest, but the previous regulator, the Office of Fair Trading, had very similar rules on affordability.

In 2014 the FCA made Wonga give refunds and loan write-offs to many customers. This was the first time there was any publicity for the concept of affordability and payday lending.

The principle of affordability isn’t a special rule for payday loans. It applies to all lending, from bank loans to credit cards. But it tends to be easier to show a payday loan is unaffordable because the repayment amounts are so large, having to repay the full loan immediately, not just a small proportion each month.

Repeat borrowing is likely to be “unaffordable”
A lender can check for affordability in various ways, such as looking at your credit record and asking about your income and expenditure. But they should also take into account how much you have previously borrowed from them.

Payday loans are meant to be used when you have a temporary difficulty. If the lender can see that you have been repaying their loan and then borrowing again (or you kept extending the term by “rolling” the loan) for month after month then this doesn’t sound like a short term problem.

In this sort of situation that the Financial Ombudsman is often deciding that the lending was unaffordable and that the lender should have realised this after the first few loans. In a typical decision, the Ombudsman says that the interest paid on the unaffordable loans should be refunded, 8% statutory interest should be added and the loans should be deleted from your credit record.

How to complain
If you have borrowed from a payday lender and you think your loans were unaffordable, you should think about complaining to the lender.

Email is the best way to do this, so you have a record of what you have said and a date-stamp on it. I have published a list of emails to use for complaints to payday lenders.

Your complaint needs to tell your story, explaining why you feel the loans were unaffordable for you, and ask for a refund of interest paid. This doesn’t need to be complicated, you don’t need to quote laws or calculate the amount of a refund. If you would like to see an example template letter, there is one on my How to ask for a payday loan refund page.

Follow the Tips for complaining.

At the bottom of that page there are a lot of comments from people making these sorts of affordability complaints. It’s a good place to look if you want to get a feel for what sort of reply you may get from the lender and how long it might take.

If the lender says No or doesn’t reply
If you get a rejection from the lender, or you are offered an amount of money which seems very low compared to the amount of interest you paid, then have a think about your case.  If you just had one or two loans from the lender and you repaid them on time, it probably isn’t worth taking this any further.

But if you feel that you were caught in “the payday loan trap”, having to keep borrowing every month, or if you told the lender you were in difficulty and they ignored this, then take your case to the Financial Ombudsman. Also do this if you don’t get a reply within eight weeks – that is the time the Ombudsman says you have to allow the lender to resolve your complaint.

It’s easy to put in a complaint to the Financial Ombudsman – you can do it online or over the phone.  The process isn’t speedy, it will usually take a few weeks for someone called an adjudicator to start looking at your complaint. It can take several months if the payday lender is slow about replying to questions from the adjudicator. Most complaints are settled by the adjudicator, with both sides agreeing, but some go to the second stage where they are looked at by an Ombudsman.

The Financial Ombudsman publishes anonymous details of some complaints which you can look up if you would like to see more about the cases that are being considered.

Payday lender regulation has improved
After the FCA became the regulator for payday lenders, it introduced important protections:

  • from July 2014, lenders were not allowed to “roll” a loan more than twice;
  • new restrictions on their ability to take money directly from someone bank account via Continuous Payment Authorities; and
  • from January 2015, the cost of payday loans was capped at a maximum of 0.8% per day and a total cost cap of 100% to protect borrowers from escalating debts.

These measures have removed many of the worst excesses of the payday loan market in Britain. They have also had the desirable side effect of making some of the least scrupulous lenders decide to exit the market.

But although standards have improved a lot, the Citizens Advice report Payday loans after the cap – Are consumers getting a better deal? in August 2016 found that many payday lenders are still not conducting proper affordability checks. And borrowers who didn’t have an affordability check were nearly twice as likely to have trouble repaying their loan as those who remembered being asked about their ability to repay.

Adequate affordability checks are an essential safeguard for borrowers. It is good that the Financial Ombudsman is recognising this and giving redress to people who were caught in the payday loan trap.

For advice, guidance, tips, consumer rights and laws on other areas for consumer  GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS!

 

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The Complaining Cow interviews Tesco bosses Dave Lewis & Matt Davies

The Complaning Cow & Tesco CEOs

Frequent readers of this blog and followers on social media will know that I have quite a history with Tesco, in complaining, taking them to court, meeting Dave Lewis etc etc! Anyway when I met him in September 2014 he bought 100 of my books, made me get arm ache signing them all (he really should buy another 100 as it’s now been updated!) and invited me back to chat with his executive team.In November 2014, when I said I should interview him.

It’s now nearly two years on and we got there. I know, how these organisations can work so slowly beats me. I had loads of questions, loads. The list grew and grew the longer they took to get their act together. Then we had a date and ol’ Dave decides the new Tesco UK CEO (Matt Davies) should also come. Maybe it was moral support?!  Apparently these two don’t do many interviews and this one was the first one they did together.

Then the powers that be said no-one would watch a film with 40 questions in it! Fair enough, so we got it shortlisted down to 10, filmed for the best part of half an hour and then it got edited.

You should know of course that there were really rather brilliant questions and challenges which were edited out 😉

The Complaining Cow and Tesco CEOs

Can you see the chair I was sitting on and those nice biscuits on the table? I told the team that there was no way I was eating that chocolate biscuit until after the interview because I had cream trousers on. I don’t think people believed that I would be as daft as I was implying. By the time I had finished the biscuit there was chocolate on my trousers and underneath me on the chair. (I wonder if it still there? I did apologise). This skill of getting chocolate under oneself whilst eating was inherited from my Dad. So was the grey hair and funny bones but sadly not the brains! Anyway, I digress…

What do I think? Well to be fair, I like both Dave and Matt  who are both very personable and with a sense of humour, which is a heck of a lot more than a lot of CEOs out there, I will say that! Dave is a lot better than his predecessor too but again, let’s be fair, Clarke was pushed. I think they are pretty genuine and I think they have the respect of their staff and really are working towards improving service (yes I know it couldn’t have got much worse!) The proof is there in the figures that sales are increasing.

Their answers?

How Dave sees Tesco connecting  was interesting. I’ll be watching how they develop that, which is no easy task!

The Complaining Cow asks Matt Davies about pricing in Tesco

Pricing – Tesco is getting better in this area and, yes, we all love a bargain but I still don’t want to be working out whether 2 blocks of this cheese is better value than 1 block of that same cheese and needing a calculator to work out price per gram?!

Service – time will tell – what was cut actually was a question from my Mum. She wanted to know why staff couldn’t just open a bag of oranges and let her buy a single one when there were no single ones available. Matt spoke about moving towards enabling customers to feel that they could be empowered to make those choices. Now that is an interesting concept and a tricky one to navigate, so we shall see.

Perceptions of quality – testing – Tesco will be doing an updated post on how to become a tester soon.

The Complaining Cow asks Tesco Dave Lewis about fake farms

The farms? – The farms? Huh! Dave and I have batted emails back and forth about the fake farms issue and I still don’t agree or accept what he says. Shall I agree to disagree? Of course not. You can read more in the article Fake farms – a bad country smell that won’t go away, including background information from social media, NFU, ASA and Trading Standards

Right. Those adverts?  I’m pulling faces at Dave because he knows what I think of them. Tesco takes flak in the battle of the Christmas adverts and I don’t think they are getting any better. He didn’t answer the question about stereotyping (he must realise?! As someone who works in children’s services I don’t like the way the adverts portray Mum as knowing what she is doing and Dad doesn’t know about offers etc. and the message this is sending to children) And in any case why do you need to be paying expensive actors for these awful ads anyway?   Also – cut from the piece – I suggested that Dave might like to get some creative ideas from customers – we could tell him what we would like to see in an ad? He did say he thought it was a good idea… You could email him and tell him your ideas if you like.

As for the clothing? Well I can tell you that sitting in front of them the evidence regarding shirts was right there! When we can buy wellies in May we will know they listened.

All in all? Had a good day, personable people to chat with (and the team involved with filming were fab, has to be said), lots to talk about and I’m quite sure quite a lot to complain about in the future! Remember Dave DID tell me to keep complaining and well, seems like a nice chap, so happy to oblige.

 

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How not to pay a charge made after transaction (and why!)

Outside of UK but inside EU
When I was on Rip Off Britain Live last year I took on a few cases. One of them was for someone whose mother had been charged a £30 booking fee after the booking process on a website that searches for flights then charges that admin fee on top (and for which she was not told about). She had booked a flight from Edinburgh to Southampton directly with the airline. The company’s hidden terms and conditions said that a charge could be made but did not provide the amount! Doubly unfair and doubly in breach of the law! Should you find yourself in this position of being charged after the booking process has completed and the company is based outside of the UK but within the EU, use this template to get your money back!

You will need to fill in all the xxxs with your information. Delete all instructions in brackets.

Dear xxx

On the date I booked a flight from xxx to xxx for (fill in date(s)) booking reference xxxxxx

The fare showed was £xxx. However, once I booked at this amount I was horrified to find that I had been charged a further £xx booking fee. This was not shown at the time of the booking. I am fully aware that in the terms and conditions it is stated that a booking service fee “may” be charged. However, and I quote the terms and conditions, which state “xxxxxxx.” (fill in anything that you have found relating to the charge that was not made known to you at time of booking i.e. hidden away in terms & conditions)

I was notified of the charge after the booking process. Making the charge after a consumer clicks the booking/payment is not part of the booking process. Company name is therefore in breach of its own terms and conditions. In order for it to be part of the process the charge should be shown.

(If the company states in its terms and conditions that it can make a charge after booking include the following paragraph). “The company name may charge a booking service fee which will be notified to you separately during the booking process.” is not an acceptable term. This could be any amount! It is obviously unfair to the consumer if the company can charge any amount it likes to a consumer without informing them of what it is before they have paid!

Company name is in breach of the EU Consumer Rights Directive 2013 (2011/83/EC). The directive prevents significant imbalances in the rights and obligations of consumers on the one hand and sellers and suppliers on the other hand. Terms that are found unfair under the Directive are not binding for consumers. It is quite clearly an unfair term to state that an unknown fee amount will be applied to the total. It is also clearly unfair to not state what this amount is at point of purchase. Under this Directive the trader must ensure that the customer understands what goods and services are being provided and that there are no hidden costs. Clearly this £xx charge was hidden. Ticking a box agreeing to terms and conditions that are not clear and in any case even if they were, were not detailed at point of purchase, is not acceptable under this Directive.

I therefore expect a full refund and redress for this unacceptable charge and stress that it has caused. I would also be interested in your comments regarding your ongoing breach of European law. Should I not be fully satisfied with your response I will not hesitate in taking the matter further. This will include but not be limited to contacting the UK European Consumer Centre which will pick up this complaint on my behalf with the relevant bodies in country where company is based including reporting your breach of the law and going to court if necessary.

I look forward to hearing from you

Yours faithfully/sincerely

For more details on complaining about holidays and flights outside of the UK but inside the EU see All you need to know about booking/complaining about holidays/flights.

Inside the UK
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 state that traders must not mislead you by giving false information or leaving out information as to the price of a product or the way the price is calculated. Also, the Consumer Protection from Unfair Trading Regulations 2014 states that a practice is unfair and therefore in breach of the law if it harms or is likely to harm the economic interests of the average consumer, so if you as a consumer made a decision that you would not have done if you had been given the full information or not been put under pressure.

For loads more on complaining about holidays and flights see All you need to know about booking/complaining about holidays/flights

For more advice, information and template letters to complain about all things consumer see the book How to Complain: The Essential Consumer Guide to Getting Refunds, Redress and Results!

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Fake Farms – A bad country smell that won’t go away…

You might remember a story about Tesco “fake farms” from March? Tesco launched a series of new “farm” ranges. It was widely reported that people felt duped into thinking that a) they were real farms where the products were coming from and b) that they were buying British. Some of these farms were similar sounding to existing farms too. I mean really similar!

Tesco Name                                                                          Real Farm with similar name
Woodside Farms                                                                         Woodside Farm (Cork)
Woodside Farm (Derbyshire)
Woodside Farm (Bedfordshire)
Woodside Farm (Nottingham b & b)
Willow Farms                                                                               Willow Farm (Hertfordshire)
Willows Farm (Skegness)
Boswell Farms                                                                              Boswell Farm  (Devon)

Unique
Suntrail Farms
Rosedene Farms
Redmere Farms
Nightingale farms

One even has the same name!

Woodside Farms is in Jersey and you know what? It even sells to supplying the Co-op and Waitrose in Jersey and Guernsey it is also available in SandpiperCI group food stores, including Iceland, in both Jersey and Guernsey. So, not only has Tesco used names similar to those that exist, it has also used the exact name of a farm that actually supplies to three supermarkets. I asked the Tesco CEO to comment on this but bizarrely he as yet has failed to provide any.

Woodside Farm in Cork was keen to let people know that they were nothing to do with supplying Tesco, tweeting, for example;

Fake farms Tesco

People expressed their displeasure with the marketing ploy:

Tesco fake farm tweet

Others showed their displeasure with irony and humour:

Fake farm Tesco post by The Complaining Cow

Farms took to Twitter to show how they feel insulted:

Fake farm tesco post by Helen Dewdney

Matt Simister Commercial Director
On You and Yours on the 6th July 2016 Tesco said that 2/3 of customers have tried the range but this doesn’t mean that they understood that the brand was not necessarily British. On the programme customers spoke of how they felt misled. One person spoke about how she bought some Rosedene strawberries and saw that they were British and deliberately bought Rosedene apples thinking that they would also be British, believing Rosedene to be a British farm. However, the Rosedene apples were grown in South Africa. And what of the other third of Tesco customers? Another spoke of her disappointment at not being able to buy British, particularly when Tesco had clearly chosen British sounding farm names.

Matt Simister, Commercial Director, Fresh Food and Commodities said that most of the produce comes seasonally from the UK but goes overseas when out of season or not grown in the UK. When asked what proportion comes from the UK, he was unable to answer the question.

He also said that sales were really good and have stayed good and didn’t answer Winifred Robinson’s question regarding whether they would make any changes given the feedback for customers, choosing instead to focus on quality that customers can trust…

A challenge to the Tesco CEO

The Complaining Cow asks Tesco Dave Lewis about fake farms
I decided to challenge Tesco CEO, Dave Lewis, on this (See Tesco history – this isn’t the first time :))  and so wrote to him several times on the issue. I had to return to the matter several times as I didn’t find his replies satisfactory. The points raised were:

1) Believing that the labelling is a breach of Regulation 5 of the Consumer Protection From Unfair Trading Regs (misleading action) which is an offence under Regulation 9. By default it is also a breach of Regulation 3 (professional diligence) which is an offence under Regulation 8.

What matters under Reg 5 is not whether it is factually correct, but it is the overall impression that counts. Misleading practices – through the information the practice contains or its deceptive presentation, it causes, or is likely to cause, the average consumer to take a different transactional decision. A breach of this Act is a £5000 fine and/or imprisonment for each breach. It also causes what’s called a ‘community infringement’ which means Trading Standards can hit a trader with Part 8 of the Enterprise Act (Enforcement Orders) which means that even if a trader gets a hefty fine under CPUTRs then they could also get an Enforcement Order against them and they can go to prison for longer than under a prosecution.

2) Whilst I may want to buy tomatoes all year round, I don’t want to believe that I am buying from a British farm when I am not. It may well say the country of origin but in far bigger, more noticeable letters is the name “Woodside Farms” or one of the other names. One could argue that one only starts to look at country or origin if they doubt the labelling. So there you have it, people trust the British farm-sounding label as a British farm or they already don’t trust Tesco and look to the country of origin! And why is the animal being reared in Holland and slaughtered in Germany anyway?

3) I do not believe that this is Tesco being transparent. It is marketing and whether customers know that or not they don’t like it.

4) What happened to due diligence? Surely, that would have highlighted that there were farms with very similar and in one case exactly the same names?

5) How much does Tesco pay Trading Standards for the advice it provides (could it be possible that Trading Standards won’t prosecute a company which is paying it?)

Dave Lewis response
Well, there were 3 of them (told you I kept going back to him! Well he did tell me a couple of years ago to keep complaining it was the only way Tesco would improve!) But the main points here were:

1) “This all comes back to the wider point that good marketing can polarise opinion. We’ve seen the debate, and understand it, but the most important thing for us is what customers think. That’s why we developed the new brands with customers in mind, and we continue to listen to them now”.

2) “While they told us that they understood that a single farm couldn’t possibly supply Tesco, they did say it was important that we work in partnership with growers and farmers who stick to strict quality standards. We do, and when the market was updated in May, I said that more than 95% of the commentary from customers has been neutral or positive about the action they’ve taken. The country of origin is clearly labelled on all the products and we’re completely transparent about where the products come from.”

3) “In addition to listening to customers, we completed legal due diligence on the brand names in relation to intellectual property, as you’d expect.”

4) “Thanks also for your comments on our Woodside Farms brand. As with all our seven new brands, this is a brand rather than a business, and this particular brand is focused on providing customers with great quality, affordable pork products. As above, we did due diligence for this brand.”

5) “We named our brands to represent the quality of our fresh food and history of working closely with suppliers, not after existing farms. Hertfordshire Trading Standards – charges on a cost recovery basis for advice given, which is a typical way for them to fund this service.” They don’t believe we are misleading consumers in relation to their purchasing decision on these brands.”

6) “The wider point here is that creating brands in this way is not at all uncommon in food marketing. Some of the UK’s most iconic and popular food brands have been created in a similar way. Customers do completely understand this – they are much more marketing literate than they’re given credit for. My experience of Tesco customers is that they are among the most savvy in Britain – and they do understand that all the products come from farms.”

Update 15/09/16 Then I asked him again in an interview: (see The Complaining Cow interviews Tesco bosses for more details and full interview)

So clearly, Tesco see the whole thing as acceptable marketing despite the public and media reports on the lack of transparency and it being misleading. Is it patronising to customers who do just accept it and/or insulting to those feel they are misled to say that they are “among the most savvy in Britain”? I might well understand that it is from a farm but I still don’t like the way it is misleading thank you very much.

Advertising Standards Authority
Their response was simply “I’m sorry to tell you that despite receiving a few complaints about this issue we are not entitled to deal with complaints of this nature because it relates to material that is not covered by the UK Code of Non-broadcast Advertising Practice, Sales Promotion and Direct Marketing.

We would consider this to constitute the labelling on a product, and as you can see from section II – m of the Code on our website, our remit does not cover labels or packaging.”

National Farmers Union
According to Tesco and other supermarkets using fake farm brands spark complaint from NFU in The Independent 19/07/16  three in five people who said they believed such products were “definitely” or “probably” British admitted that they would feel misled if they were informed that it came from overseas, according to a YouGov survey commissioned by the NFU. In a survey in the Independent readers were asked “Do you mind that Tesco uses fictitious farms in its branding?” 82% said “Yes it’s misleading.“

The NFU has taken its complaints to national Trading Standards. However I have also already done that and the response showed that it was going to do little to address the issue, so it will be interesting to see if the NFU get the same response.

Trading Standards Response
“I think that whilst I can see that there is controversy, the retailer in cases such as this could rely on the label names being brands as opposed to them being illustrative of geographical locations.

These labels they say ‘farm’. The origin of the products is likely to have been a farm. They refer to fictional named farms, and I can see that some assert that this misleads because it gives the impression that the farm sounds British. I think this is the central issue but I think it would be difficult to persuade a judge that these fictional names suggest a clear geographical origin to the purchaser (especially when on the same small label, the country of production is included).

If the label had said Essex Farms or Wiltshire Farms or some other name linked to a geographical location then perhaps it would be worth examining”.

So what do you think? Misleading? Think items are British? Now you know many aren’t will you still buy? Do you buy because the quality and value is good but you still don’t like the ethics?

I look forward to hearing your views!

You can contact the UK Tesco CEO here

Tesco Group CEO here

History with Tesco links to all the posts over the last few years where I have complained, taken them to court, met With Dave Lewis..

For the full interview see The Complaining Cow interviews Dave Lewis & Matt Davies.

 

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Found me from Jeremy Vine Show?

Here are some useful links related to the story:

All you need to know about booking/complaining about holidays/flights – various links to various laws, stories, legal rights etc.

Civil Aviation Authority Consumer Law

Why you should write not phone to complain effectively 

Top 20 Tips on complaining effectively

ceomemail.com for contact details for CEOS

For more advice, tips, information and template letters: GET THE BOOK! How To Complain: The ESSENTIAL Consumer Guide to Getting REFUNDS, Redress and RESULTS!

But the most common complaints? Here you go:

Everything you need to know about complaining to telecom providers

Everything you need to know about complaining to energy providers

Consumer Rights Act (Sale of Goods Act and Supply of Goods and Services Acts replaced) including digital cover.
Sign up for the Complaining Cow Moos – only send a few newsletters a year but keeps you up to date with what is happening for consumers etc.

 

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