Lenders say they face avalanche of spurious claims
COMPLAINTS to the Financial Ombudsman about payday lenders have rocketed from barely 3,000 in three months last year to almost 11,000 in the same period this year.
But lenders say it’s not their fault and blame compensation-chasing firms for drumming up complaints, often without merit.
Almost half the complaints to the Ombudsman – 44% – were rejected.
“Claims management firms think that payday lenders can be their new pot of gold, their new PPI,” one payday lender told me.
“Some of the complaints are from people who aren’t even our clients.”
One operation being blamed by lenders is Payday Refunds, which takes 36% of any compensation and has links to an unsavoury finance figure called Mark Kennedy.
Lenders say that they are receiving huge numbers of unfounded claims from this company and many are forwarded to the Ombudsman, which charges lenders £550 per complaint whatever the outcome, unless it chooses to waive the fee.
I put Payday Refunds to the test by submitting a complaint about a lender using fake details, including a non-existent address.
Three hours later Payday Refunds forwarded my details to the supposed lender “to process a complaint against your company for the mis-selling of a Payday Loan and a general breach of duties under Financial Conduct Authority regulations.”
Despite the fact I’d provided no evidence of any loan, Payday Refunds later emailed me to say it would pass my claim to the Financial Ombudsman “just in case your lender is not being helpful”. This MURKY PAST Mark Kennedy would seem to breach Claims Management Regulator rules, which state that compo-chasing firms should “conduct sufficient customer fact finds before submitting enquiries”.
Payday Refunds is a trading name of Direct Financial Claims Limited.
It used to be owned by DC4 Ventures Limited, which in turn was part-owned by 53-year-old Mark Kennedy. In February, ownership was transferred to Carolina Costa, a director of Direct Financial Claims.
Companies House records show that she has shared the same address in Monaco as Kennedy.
A few days ago Costa’s shareholding was transferred to another director, Vincenzo Vernon.
Kennedy was previously a director of notorious Secure My Money which, as I revealed in 2014, ripped off people desperate for credit, charging fees even when clients did not get a loan.
Last year Kennedy was banned from being a director for eight years, the Insolvency Service describing Secure My Money as “Like a shark feasting in a pool of the most vulnerable and financially distressed”.
This July the Financial Conduct Authority banned him from the finance industry, citing his “lack of honesty and integrity”.
I approached Payday Refunds and Mark Kennedy for comment and heard back from director Vincenzo Vernon. He denied making complaints on behalf of clients without sufficient evidence, and blamed lenders for failing to help with data requests made on behalf of borrowers. He added that borrowers may have become confused by the “blizzard” of different lenders.
“It would seem clear that you’re being contacted by those payday lenders who wantonly mis-sold highinterest finance to the UK’s most vulnerable people,” he said.
“These lenders are trying every avenue possible to avoid answering for what they have done.”
He added that Mr Kennedy’s role at Payday Refunds was limited to supplying computer software.
The Consumer Finance Association, which represents the payday lending industry, says that the cost of complaints to the Ombudsman may drive some lenders out of business.
“We are seeing some worrying tactics deployed by claims management companies that are not always in the best interests of customers,” it said. “The collapse of a company does not help people that want to access credit or those that believe they have grounds for a complaint.”
PS, If you’re unhappy with how a payday lender dealt with a complaint you can go directly to the Financial Ombudsman, you don’t need a claims management company.
Ombudsman charges £550 regardless of the outcome of complaint