PiggyBank banned from handing out payday loans amid watchdog crackdown

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PiggyBank banned from handing out payday loans amid watchdog crackdown



PAYDAY lender PiggyBank has been temporarily banned from handing out loans over “concerns” it could be irresponsibly lending.
The city watchdog is investigating the firm’s “creditworthiness assessments”, which determine whether a customer can afford to take out a loan.
1 PiggyBank is being investigated by the FCA over its “creditworthiness checks”Credit: PiggyBank
Typically, high-cost lenders, such as payday lenders and rent-to-own firms, lend to borrowers who are often rejected by those on the high street because of poor credit history.
But this comes at a cost, with lenders charging sky-high interest rates.
It’s these rocketing rates that can plunge vulnerable borrowers into debt, leading us to launch our Stop The Credit Rip-Off campaign calling for them to be capped at double the amount borrowed.
PiggyBank, which has 45,000 customers, charge up to 1,698.1 per cent APR for cash loans, compared to the 2.9 per cent APR charged by a number of high street banks.
Why we want to Stop The Credit Rip-OffWE never want you to pay more than double the amount you’ve borrowed – whether it’s for a new sofa or a loan to help pay your bills.That’s why The Sun has launched a campaign calling for a cap on the total cost of rent-to-own loans and doorstep lending at double the original price or loan amount.
A similar cap was introduced for payday loans in 2015 and since then the number of people struggling with unmanageable debts to those lenders has more than halved, according to Citizens Advice.
People on the lowest incomes, living in the poorest places, are paying a poverty premium – up to 7 million people have resorted to high-cost credit, according to the Department for Work and Pensions.
People whose wages or benefits don’t stretch far enough need to borrow from rent-to-own or doorstep lenders to help pay for things such as an unexpected bill or to furnish their homes.
These come with exorbitant rates of interest – more than 1,500 per cent in some cases of doorstep lending.
It is scandalous that one mum who borrowed cash to help keep a roof over her family’s head and ended up paying back over THREE times the original amount.
It’s time to stop the credit rip-off.
Here’s what we demand:
Rent-to-own

Cap on all repayable costs at double the item list prices (including fees, add-ons and interest)
Ban on incentives for all sales staff
Ban on discounts for existing customers to tempt them into more credit
Companies to publish example interest rates and costs on all payment options

Doorstep lending

Cap at double the original amount borrowed
Stricter affordability checks
Ban on discounts for existing customers to tempt them into more credit

 
But the Financial Conduct Authority (FCA) is worried about how thorough PiggyBank’s affordability checks really are.
Responsible lenders are obliged to carry out credit checks on applicants before handing out cash to make sure that they can afford the repayments.
The FCA has asked PiggyBank, which is part of company DJS (UK) Limited, to temporarily stop lending while it carries out its investigation.
There is no end date for the review so it’s not clear yet when, or if, PiggyBank can start lending again.
Existing customers are being urged to continue making repayments as normal and to contact the company with any concerns they have.
They are also still able to manage their accounts online or by phone as usual.
At this stage, the watchdog is reviewing the possibility of irresponsible lending, so details on what this could mean for customers depends on the outcome, including any potential redress.
The Sun’s Stop the Credit Rip-off campaign wants to put an end to extortionate credit deals
A Financial Conduct Authority spokesperson said: “The firm has agreed to stop lending to customers and to carry out an external review of its lending policies.
“It is important all firms follow our rules, particularly when it comes to affordability and we will take action when we see breaches of our rules.”
PiggyBank told The Sun that it has also taken the opportunity to update its website and back-end systems.
A spokesperson said: “As a responsible lender, we continuously strive to be the best that we can be and improve our services wherever possible.
“We achieve this by working closely with the FCA at all times and have done so voluntarily.”
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A huge 5.4million high cost credit loans were taken out in the year to June 2018, according to the FCA, up from 4.6million in the same period the year before.
Earlier this year, we revealed how payday loan borrowers are still being charged DOUBLE the amount lent to them.
Around the same time, the FCA released data that showed complaints about payday lenders soared by a whopping 130 per cent in 2018,

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