Which! say payday lenders' fees are 'unlawful'
Which!!! are accusing payday lenders of 'exploiting borrowers' (no shit) and acting unlawfully by charging excessive default fees. They reckon that 10 of the 17 leading payday lenders have default fees over £20 and four charge £25 and above with Wonga leading the way with £30 penalties.
The Which! report states that excessive default fees are unlawful under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), which says that it is unfair for lenders to charge a disproportionately high fee if borrowers default on a loan. The Office of Fair Trading said that penalty charges for credit cards should be, at a maximum, £12 unless there are exceptional circumstances.
Richard Lloyd, executive honcho at Which!! said: "We believe payday lenders are exploiting borrowers with excessive fees which can push them even further into debt. If they cannot justify why these charges are so high and refuse to cut them, we would look to take further steps to protect vulnerable consumers. The regulator must also take action to ensure all fees are fair, proportionate and only reflect lenders' costs."
Which! now want the Financial Conduct Authority (FCA) to introduce a cap on what companies can charge in default fees. Of course, the FCA have already said that they would be introducing an interest rate cap on payday loans, but will the industry have out-thought those chasing them by the time they start imposing new rules?