Complaints about home loans and surety loans are increasing

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The number of complaints about surety loans increased by 298% from the previous quarter, while the number of new complaints about door-to-door loans increased by 144%.

On average, non-PPI resolved complaints had a retention rate of 41%, while the levels for surety loans and home loans were 88% and 72%, respectively.

The number of complaints about payday loans remains high but is below its 2018/19 highs, while complaints about credit cards increased by 26% compared to the previous quarter.

Credit complaints

Guarantee loans saw the largest increase in complaints to the financial ombudsman between July and September 2020.

Complaints increased by 298% compared to the previous quarter to 4,191, with 88% of the resolved complaints being confirmed by the Ombudsman.

Home loans, also known as door-to-door loans, saw complaints rise 144% to 3,199. 72% of the resolved complaints about this type of loan have been confirmed.

What is striking about the numbers recorded by the Ombudsman is that while only 41% of non-PPI claims were maintained in the second quarter, the numbers for consumer credit products were all higher.

These are the percentages of cases that have been confirmed in different sectors:

  • Guarantee loan – 88%
  • Home loan – 72%
  • Personal loans – 50%
  • Payday Loans – 64%
  • Installment Loans – 68%
  • Logbook borrowing – 63%

Unaffordable lending is a common complaint with loan products, especially those with high interest rates that are offered to customers with few alternatives.

However, the Finance Ombudsman notes that complaints about payday loans have decreased from their peak in 2018/19. This may be due to the collapse of many payday lenders including Sunny and Peachy over the past year.

Financial risk

The rise in complaints about surety loans and home loans suggests that more and more people believe they were sold these products when they shouldn’t have been.

As we explain in our guide to surety, the presence of a surety in a loan agreement has often been used to justify larger loans than the applicant would normally have received. This increases the risk that the applicant will fail and the surety will be held liable for the guilt.

Both surety loans and home loans were part of an investigation commissioned by the Financial Conduct Authority (FCA) to look at how customers’ debt increases when they borrow regularly from their lenders.

46% of home loan customers said they usually take out more credit when their provider says money is available.

Worried About Loan Fraud? Read our guide to spot them.

Credit card complaints

The Ombudsman’s figures also show that credit card complaints continued to grow, up 26% quarter over quarter to 3,828.

Looking at the year-on-year increase, credit card complaints have increased by 66%, but the retention rate in the second quarter was only 33% – largely on par with the previous quarters.

These numbers may increase as more cases are investigated, and the Ombudsman has confirmed that more cases are being watched by customers dissatisfied with the way their lenders treated them during the coronavirus crisis.

While support options such as deferred payments for credit cards and loan products have been available since April, it comes as no surprise that some customers are dissatisfied with the way things have worked, given the level of support expected from lenders.

Financial protection for customers has been expanded in light of the second coronavirus lockdown in England.

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