By Emma Rumney
LONDON (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 <ENVA.N>, 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.
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)