Brokers linked to payday loan companies may be raiding the bank accounts of over 1 million Britons, with many being the poorest in society, the UK’s biggest banks have warned.
Natwest, one of the largest retail banking chains in Britain, said it was “inundated” with complaints from customers.
Victims claimed that brokerages, offering deals on payday loans – short term loans with very high fixed rates of interest – are extracting sums of £50 to £70 from savings accounts without informing customers first.
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According to Natwest customers, the businesses are websites that offer to find payday loan deals online. However, buried in the small print is a tacit agreement that brokers can access the bank accounts at any time.
Natwest, who told the Guardian that they had received up to 640 complaints a month regarding payday brokerage websites, said the majority of customers affected were financially vulnerable, and in many cases were already severely overdrawn.
The brokerage websites have also been accused of sharing financial information with other businesses without consent, and charging an additional levy for its services on top of the huge rates of interest slapped onto standard payday loans, which can be more than 3,000 percent.
“We’ve seen large numbers of customers incurring charges they don’t expect when using a payday loan broker since July this year,” said Terry Lawson, head of fraud and chargeback operations at the Royal Bank of Scotland (RBS) group, which includes Natwest and Ulster Bank.
“Customers’ account or debit card details are gathered and sent on to up to 200 other brokers and lenders who charge them fees for a loan application,” he added.
The news comes as thousands of customers who took loans with controversial payday loan company Wonga are to have their debts written off, in an action expected to cost the legal loan shark more than £200mn.
The UK’s financial watchdog, the Financial Conduct Authority, said Wonga did not do enough to vet customers and their ability to pay back the interest incurred on loans, which can be higher than 5,000 percent.
As a result, a large number of Wonga customers were forced to admit they were unable to pay the company back after taking out a short-term loan.
Report By RT