The consumer group Which? has been drawing attention recently to payday lenders and what it sees as exploitation of borrowers due to their excessive fees for non-payment which can push them further into debt. One of the big payday lenders, Wonga, stated in the media yesterday that they are "completely transparent about fees" as though this is sufficient in getting them off the hook for any responsibility to their customers.
Some may say that if an individual gets into debt it is their own fault, and many in business seem to think this way. However, in the House of Lords yesterday a question was raised about why the Government is not doing more to hold banks to account for the PPI scandal. While billions have already been paid out to customers in recompense there was a view that many more customers may have suffered losses and not claimed. One Lord stated that it was in fact vulnerable customers that were less likely to claim.
In April this year the FCA will be taking over the regulation of payday lenders. It seems very likely therefore that we are going to hear about mis-selling, poor customer treatment and unethical behaviour similar to PPI and the banks in the payday lending arena (bearing in mind the OFT are already investigating a 7th payday lender following its market study in 2013).
The whole question of marketing to "vulnerable customers" is a tricky subject. Some easier classifications of "vulnerable"are children, the elderly, the mentally impaired.The FCA has emphasised the importance of Treating Customers Fairly and their 6th customer "outcome"states that " products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and targeted accordingly". Hopefully the payday lenders are now creating genuine "vulnerable customer" strategies explaining their approach to transparency in anticipation of FCA challenge.
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