Last month, we informed you that the Office of Fair Trading (OFT) stripped Yes Loans of its credit license. Yes Loans is one of the largest loan brokers in the UK and was accused of engaging in “deceitful and oppressive business practices.” Representatives recently announced that Yes Loans and its associated business, Blue Sky Personal Finance, will not appeal the OFT decision.
Therefore, the companies will not be able to broker loans for customers.
A credit brokerage firm like Yes Loans matches prospective borrowers with lenders willing to offer financing. The OFT discovered that Yes Loans misled some customers into thinking the company was a loan provider, not a credit broker. Other consumers were provided payday loans with higher loans APR than the products they initially requested.
The company also requested credit card details for false reasons and deducted brokerage fees without consent.
OFT Director of Consumer Credit David Fisher commented that the agency’s “successful action” against Yes Loans “sends out a strong message” that inappropriate practices will not be tolerated, regardless of company size. Mr. Fisher explained that the difficult economy has driven more financially desperate consumers to payday loans.
This has made increasing standards a priority for the OFT and the industry.
The OFT also decided to revoke the consumer credit license of Money Worries, an associated debt management firm. This company lodged an appeal, which allows it to retain its license until an outcome is issued. A statement issued by all three companies clarified that Blue Sky and Yes Loans are still permitted to trade but may not perform duties covered under a consumer credit license, including brokering loans.
The statement explained that the decision not to appeal the OFT decision regarding Blue Sky and Yes Loans was strategic in nature and should not be considered an acceptance of the OFT claims.
Blue Sky and Yes Loans reportedly underwent a major reorganization in late 2011 to address the concerns resulting from the several-year investigation by the OFT. Included in the changes made was the elimination of upfront fee charging.
However, this was not sufficient for the OFT due to the length of time that unacceptable practices had been employed and the fact that some members of leadership were still in place. According to the statement, no jobs will be lost because staff will be provided positions within the organization based in Cwmbran, South Wales.
The Financial Ombudsman Service revealed that complaints about credit brokers have been rising. During the last six months of 2011, the agency upheld more than eight in every ten complaints received regarding Yes Loans. Yes Loans had been trading since 2003 as a broker for loans and claimed to process approximately 50,000 loans each month.
Though this is a blow to the industry, many providers of payday loans are reputable and do not engage in questionable tactics. They offer small value no credit check loans designed to improve personal financial situations. Consumers use these loans to consolidate debt and pay emergency expenses, repaying the loans with their next paycheck.