UK: Two Payday Loan Companies Shut Down

Office of Fair Trading closes two payday loan companiesTwo Payday Loan Companies Closed by the OFT
If you’ve had to make hefty investments, such as paying tuition for college or buying a house or a car, chances are you have borrowed some money from a bank or lending group of some sort. However, you may not have realised that some of these companies are being found to be fraudulent.

In the United Kingdom, the Office of Fair Trading has taken away licenses from two different popular lenders for not disclosing details of previous convictions (which included fraud and violence) when submitting an application for a lenders license: Loansdirect2u.com and B2B International UK.

Something that both of these loan companies had in common was that they offered short term loans for industry-high prices – what is commonly refered to as “payday loans”. They charged an extremely high rate of interest for their services, making it very difficult for borrowers to get out of debt.

Before being prosecuted, loansdirect2u.com subjected its borrowers to some rather incredible fees including the following:

  • An absolutely astounding interest rate of 2,514 percent for minor loans.
  • A fee of £3.99 just to be considered for a loan. This means that applicant still had to pay the fee, even if the company decided not to lend them any money.
  • A £10 fine if they were late to repay a loan.
  • A £20 fine if the lender contacted debt collectors.

The problem with these payday loan companies companies is that they dig clients deeper and deeper into a pit of debt, making it almost impossible for borrowers to climb out. Some of these companies even threatened to leave families homeless because they weren’t able to pay their fees.

It’s good to see the Office of Fair Trading taking action in these cases – and we look forward to seeing tougher regulation of the loan industry as a whole. For more on this story you can continue reading at The Guardian.

Philip

6 Comments

  1. Slime, absolute slime. I used to work for a company like this right out of college. I really had no idea what their practices were until I’d been there a while. I quit when I found out.

  2. 2514% !!! Wow, that is truly highway robbery. I understand sometimes people have their back against the wall and are desperately seeking help but taking advantage of people like this is on this scale is outrageous!

  3. I have always said that it seems like loan sharks are a better idea than payday loan stores, but now I am starting to think that the loan sharks are the ones running these stores.

  4. I’ve seen some horrific interest rates, but that one beats them all. I definitely think companies like that should be shut down, all of them. I also think that buyers should know a bad deal when they see it. Those companies wouldn’t even be in business in the first place if people would read the fine print and see what they’re getting into!

  5. When reading the title, I though, oh look, two other companies shut down because of the recession, no surprise there. That sounds like serious abuse from their part! First of all, a company that asks for a fee from clients just to be considered for a loan…. that company loses me as a client seconds later!

    • I know. The problem is that so many people are heavily in debt and desperate for money they feel like they have no choice. I wish the authorities would shut down all these payday loan companies, they are exploiting people who are already in financial trouble. It’s a disgrace.

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