“THE PREDATOR HAS BECOME THE PREY”
Putting Pressure on an Industry That Serves as Many Borrowers’ Last Resort
It’s no secret that the entire payday loan industry has faced heavy criticism due to exorbitant fees and interest on short-term loans. However, these are often the only options for borrowers with poor credit who need funds in a hurry. According to Readies – one of the UK ‘s leading bad credit payday loan providers – the vast majority of their applicants are people who could not otherwise obtain funding through traditional means, so the fact that they’re able to borrow at all is enough to gain their appreciation, even with heavy interest piled on.
Are the CMCs the Predators Now?
Claims management companies (CMCs) are responsible for facilitating legal claims against payday lenders when a borrower feels they have been mistreated to the point of requiring compensation. Because of the reputation that payday lenders have earned as predatorial lenders, CMCs are finding it easier than ever to have cases judged in their favour. As a result, the tide has shifted to where the CMCs themselves are often the ones engaging in predatorial activity because they’re preying on every payday lender they can find.
CMCs Sending Out Complaints by the Thousands
Some payday lending companies have reported receiving thousands of spurious claims from CMCs over the past two years. One company even stated that it received more than 2,500 false claims regarding borrowers who were not even their customers. In many cases, CMCs are using this tactic to rack up winnings for their own profits, and the end borrower never actually sees any of that compensation. There have been reports of CMCs submitting more than one thousand claims to a single payday lender within the span of three days, and more than a quarter of those claims were related to a loan that was not even issued by the accused lender.
Regulations are Needed to Prevent Abuse by CMCs
Five years ago, the concern surrounding payday lenders was that they were charging exuberant interest rates, and some were even using nefarious tactics to harass borrowers into paying. However, now the climate has shifted to where the predator has become the prey, as CMCs are now viewing payday lenders as ideal targets in a widespread scam that has created the need for new legislation on the matter. If CMCs are not held accountable for their fraudulent and arbitrary claim filing practices, the payday lending industry will continue to take a huge blow, and ultimately that will only serve to make borrowing more difficult for the average consumer with poor credit.