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Loan Industry Not Cleaned Up As Debt Numbers Increase

A revamped Consumer Credit Act was designed to clean up the loan industry, creating a fairer, cleaner marketplace for borrowers, and stamp out loan sharks. Sadly, consumers are still reporting appalling stories of aggressive phone calls, harassment and poor service by loan companies.

The new Act was brought in last April, enabling borrowers to also complain about consumer credit to the Financial Ombudsman Service, but debt charities say that the regulators are not pulling their weight.

One married couple with four children have seen their debt rocket from £5,500 to over £50,000 in the last eight years at the hands of Paragon, a lender in Solihull. During that time they have been aggressively pursued for their debt. The National Debtline charity say that this family’s case is not a unique occurrence. They say that the Consumer Credit Act should have meant an improvement in customer service standards, but it has not filtered through yet, and customers are still receiving poor treatment. The family’s situation came about because repayments for the original £5,500 loan were not kept up due to a problem with the husband’s salary not arriving in his bank account – through no fault of his own. Paragon hit him with heavy penalties while he was out of the country and his wife did not open his letters. Meanwhile the debt grew and aggressive phone calls began. While the family tried to sort it out, Paragon ignored their requests for information. A repayment amount was agreed without the couple knowing their debt, with the result that the debt continued to grow. They feel that the stress and anxiety has been unbearable, with the wife experiencing a miscarriage after a terrible phone call from Paragon in which they told her the family would lose their house, even though the debt was unsecured.

Since 6 April 2007 the Financial Ombudsman Service (FOS) has dealt with consumer credit complaints, and so far there have been 60 complaints in eight cases which the FOS recommended for redress. Unfortunately the couple cannot be helped because their case began before 6 April. The family have contacted the Office of Fair Trading (OFT), but they cannot get involved in individual cases. Paragon say there have been miscommunication problems on both sides. Arrow Global has now bought the debt off Paragon.

If you have loan difficulties you should first speak to your lender to try and set up a new repayment plan. You can seek free advice from National Debtline, Citizens Advice, the OFT or the Consumer Credit Counselling Service. The FOS can mediate between borrowers and lenders; they can investigate complaints against unsecured debt lenders, credit brokers and debt collectors, from 6 April 2007. All business most now follow correct procedures when dealing with complaints, with a response required within eight weeks. The FOS can order a lender to pay redress to customers.

The number of people in debt and seeking help continues to grow. A single charity reported a 20% rise in advice requests, with 6,600 calls a day. The number of people considering bankruptcy went up by 50%, with then blame laid squarely at the door of the five interest rate rises since August 2006. The Citizens Advice Bureau say that debt problems are the single biggest issue they have to deal with, handling 1.7m calls in the last 12 months.

Tom Smith
17th September 2007

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