Having less than perfect credit in a tight lending market can result in consumers making desperate decisions. A common error that is made is responding to advertisements for bad credit loans, without realising that the loans on offer are advertised by a credit broking service, rather than directly from the lender. Consumers that have been turned down by traditional lenders often believe it is too good to be true when told that a much needed loan can be arranged.
According to figures published in the Daily Mirror, the Financial Services Ombudsman has received more than 5,000 complaints in the first quarter of 2011, regarding credit brokers. Yes Loans is one of the biggest credit brokers operating in the UK. The home page on their web site fails to reveal they are credit brokers, misleading those who look no further than the advertising copy which reads “We help thousands of people every day to find the right financial solution, even if you are suffering from a bad credit history, CCJ’s, defaults or arrears. “
Despite the APR being shown as a typical 51%, those seeking loans are willing to pay the price to secure additional funds, fully aware that lenders offering preferential rates are not interested in their business. Unfortunately many of those seeking loans fail to familiarise themselves with the terms and conditions of actually doing business with a broker, failing to take the time to scrutinise the terms and conditions.
Basically all the information regarding the contract is available on line, yet many simply telephone to arrange a loan without reading the terms and conditions. This then leads to inevitable accusations that they have been scammed, when they discover they have paid for a service and have no legal redress to an immediate refund. If the terms had been scrutinised and understood first, the majority of complaints could have been avoided. Nevertheless some complaints are entirely justified.
Acting as a finance broker Yes Loans has the right to charge a fee for their service, which is currently £69.50. Their terms clearly state that they do not lend money but act as a client broker for a term of three months, during which time “We seek to match your loan or finance application with one or more of the lenders or financiers.” In order to be able to process a loan, if they are able to secure one on behalf of their client, the company states that “You authorise Us to retain your charge, credit and debit card details.”
It is explained that if the client does not enter into a loan arrangement found by the broker within three months the £69.50 fee will be refunded, minus £5 which the company will retain as an allowable fee under the consumer credit act. Refunds must be requested in writing. If a client changes their mind within 14 days of applying for a loan the fee will be refunded upon written request.
A common occurrence is that a consumer telephones to arrange a loan, told it can be arranged, and the application completed by phone. The consumer gives their bank details, and only at the end of the call are they apprised of the fee involved. With no signed paperwork yet in place Yes Loans have often taken the fee immediately, despite assuring the new clients this will not be done. In some cases new clients have agreed to the fee being debited but requested a delay until funds can be made available to cover the debit. If the debit occurs prior to the agreed date the client will of course incur bank fees for returning the fee payment as insufficient funds.
The fee is thus paid but often no loan materialises, as lenders cannot be found willing to lend to those with very bad credit. Naturally Yes Loans retains the fee for the allowable period of three months, as per the terms and conditions. Complaints then arise as clients have paid a fee and not received an immediate loan as they were expecting, and then have to wait three months for a refund of the £69.50 they could little afford in the first place. Clients who find the fee debited from their bank accounts have no redress through their bank, as they willingly gave their banking details.
Typically many consumers fail to acquaint themselves with the terms and conditions and just presume they will be given an immediate loan. They fail to understand that the credit broker is not in fact promising an instant loan, nor can they guarantee any loan will be given. In the meantime the fee is held to the chagrin of the client who feels ripped off.
Yes Loans are credit brokers who charge a fee to arrange a loan for those unable to find a loan through traditional methods. If no loan if forthcoming the fee will be returned after three months and the cost to the client will be £5. If an acceptable loan is arranged the client will not have the fee returned. Put simply there is no need to pay a fee to arrange a loan through a finance broker. The interest charged on the loan covers the lenders costs, plus commission to the broker.