September 11, 2018 / 11:05 PM / 2 months ago

British payday lender CashEuroNet UK racks up more complaints than Wonga

    By Emma Rumney
    LONDON, Sept 12 (Reuters) - Complaints about British payday
lender CashEuroNet UK shot up by more than 200 percent in the
first half of this year - more than double the rate that drove
rival Wonga into administration, data published on Wednesday
showed.  
    Wonga, Britain's most well-known lender offering short-term,
high interest loans, often to troubled borrowers, collapsed in
August after being hit with a deluge of compensation claims from
customers.             
    But the data, from the Financial Ombudsman Service (FOS),
which adjudicates on disputes between consumers and financial
services firms, shows that in the six months to June CashEuroNet
UK, owned by U.S. lender Enova International         , received
more complaints than Wonga for the first time in recent years. 
    Its brands QuickQuid and Pound to Pocket together racked up
4,561 customer complaints, up from 1,447 in the previous six
months and more than the 4,513 the FOS received against Wonga. 
    The data reflects how others in the industry, already
struggling after the imposition of tighter regulation, could be
vulnerable as firms that help consumers make claims turn their
attention towards payday loans.             
    "Given the role that claims management companies had in
putting Wonga under, it is likely that they will now be circling
on the other payday lenders," said Colin Jackson, financials
analyst at Goodbody.  
    In its most recent results filing, Enova International
warned that it had incurred significant costs as a result of the
increase in complaints, adding that the FOS had been strict in
its interpretation of the rules. 
    "If the FOS continues to issue findings in this manner, and
we are required to continue making significant payments to
resolve complaints, such findings could again have a material
adverse effect on our business," the filing said.
    
    FINANCIAL IMPACT
    CashEuroNet UK's UK managing director Nick Drew said it was
committed to good lending practices and treating customers
fairly. 
    "Our business is profitable and growing, and we remain
excited about the opportunities, especially in light of the
diminished competition in the market," he said in an emailed
statement. 
    However, the firm's net income fell from 18.3 million pounds
in 2015 to 11.2 million pounds in 2016, according to its most
recent accounts. 
    Across the industry, profits have fallen in recent years
after the Financial Conduct Authority capped the level of
interest they could charge following pressure from critical
lawmakers and campaigners. 
    Complaints are also costly. The FOS charges financial
services firms 550 pounds every time it investigates a case. 
    When a complaint is successful, firms are usually asked to
refund the interest, fees and charges to the consumer, an
ombudsman spokesman said, although in some circumstances
businesses will also be asked to write off the debt. 
    He added that the number of complaints upheld against payday
lenders was consistently high, averaging at around 60 percent
and rising as high as 75 percent for some firms. 
    The risk a spike in complaints poses to payday lenders is
further evidence of the fact they are "heavily dependent on an
accommodating regulator", Jackson said.  
     

 (Reporting by Emma Rumney, editing by Ed Osmond)
  
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