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Banks refusing to cancel pay-day loan payments

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by Jan Harris
Banks refusing to cancel pay-day loan payments

The BBC has reported that some banks are refusing to cancel payments to payday loan companies when asked to do so by their customers.

Bank customers have a legal right to cancel payments from their accounts under the 2009 Payment Services Directive.

However some banks believe that they do not have to cancel certain types of payment.

Speaking to Radio 4’s Money Box programme, The Financial Services Authority said: “Customers have the right to stop any payment leaving their account.

“No distinction whatsoever has been made for pay-day lenders or indeed any other group.”

On its news site the BBC reports the case of a from Norfolk who was advised by charity National Debtline to cancel his payment to a pay-day loan company and focus on paying priority bills such as council tax.

The man contacted Barclays to cancel the payment but was told that they were unable to cancel payments to financial companies.

HSBC also said that they might not be able to cancel payments in certain circumstances, while RBS and NatWest, which is part of the RBS group, said they would be unable to cancel single payments and instalment payments.

The popularity of pay-day loan companies has soared since the credit crunch, with many people unable to secure short-term loans from mainstream banks.

Recent research by Santander revealed that a million people are turning to pay-day loans each month to pay essential bills such as water, energy, and council tax.

Wonga, which offers short-term loans of up to £1,000, trebled its profits to nearly £46 million in 2011 and the number of loans provided quadrupled to nearly £2.5 million.

Pay-day loan companies such as Wonga, which charges an annual percentage rate of 4,214 per cent, have been accused of pushing people into a spiral of debt.

The payday loan industry is currently under investigation by the Office of Fair Trading over allegations of irresponsible lending.

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Story link: Banks refusing to cancel pay-day loan payments

News posted: September 17, 2012

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