A fair and balanced view?

Much has been written in the media about the fate of Wonga and the potential for other 'payday' lenders to follow a similar path if the current volume of consumer redress claims against these organisations continues.

The narrative in the media is simple - it's those nasty CMCs that are hounding these lovely lenders out of business. Let's have a dose of reality and a sense of balance here shall we?

At the heart of the ACC's ethos is the consumer - remember them? Access to justice for consumers - many of whom are financially vulnerable is the lifeblood of our member activity.

You see, in my honest opinion, it is quite disingenuous of payday lenders and the media to point the finger of blame at Claims management companies as the fallout from the Wonga collapse continues.

With the publication of the latest set of complaints data from the FOS clearly showing a growing trend of claims against these payday lenders, we clearly need a balanced viewpoint when understanding why this is the case. 

Let me be clear, for CMCs operating with best practice, and all of our members abide by our guiding principles to do so, it makes no economic sense to present spurious or speculative claims for consumers so, clearly, the rise in these claims from consumers via third parties such as our members is being driven by the increased knowledge of the poor and borderline fraudulent lending practices of payday lenders. 

Look at the uphold rate at the FOS for claims against Casheuronet UK LLC. In 69% of cases that have been resolved, the complaint was upheld in favour of the consumer - the average across all businesses is 30%. What does this tell you? Consumers were treated badly by these companies and, like other financial institutions, they are now paying the price for their previous poor practices. That is not the fault of CMCs, it lies squarely at the management of the companies themselves who must have hoped never to have been brought to account. 

At the inception of this industry the affordability checks made on lenders were quite simply deficient and in many cases non-existent. This has led to widespread consumer detriment. Our members in the ACC are committed to aiding consumers seek access to justice and it is clear, as Carol Brady said in her review of CMCs in 2016:

“A well functioning CMC market can also act as a check and balance on the conduct and complaint handling processes of businesses."

This is much needed in the case of the payday loan sector as consumers were clearly taken advantage of and are now suffering detriment which our members are seeking to redress.

In closing I want to add that we have this week arranged to meet with the CFA and look to how we can both work together to ensure a common set of principles in dealing with claims so that the consumer can access justice. We are committed to working with these organisations and that process begins now. Further to that, we have established an expert group of our members dealing in these claims so that we can all share best practice. 

As we await the FOS ruling around the six year jurisdiction, which we believe will be resolved in consumers favour, it is clear that those organisations such as Wonga, which failed to ask consumers any questions about their outgoings when lending to them, will see more consumers seek to be compensated for the position they have been placed in.