Michael Russell MSP warns of online loan sharks

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Michael Russell MSP for Argyll and Bute has today issued a warning against the increasing number of online loan sharks, taking advantage of desperate and vulnerable people.

Mr Russell explained: “These companies are cropping up all over the internet promising easy loans and easy payments but rather than being professionals in the financial services industry which is the image they try to project, they are in fact ruthless and uncaring salespeople. Whilst what they are doing might just be legal, there is no doubt that their sharp practices are immoral.

“The modus operandi is that they set up as an introducer, a marketing front. They offer all sorts of wonderful easy to apply for unsecured loans, no credit checks required, quick pay-outs, etc. They earn commission in two ways, firstly by passing the application to the lender who charge extortionate interest and then by collecting the premiums. It is in collecting these premiums that the issue first came to light with my office staff and they have been horrified by what they have found.

“On receiving the application they forward the details to the lender who will then send out loan agreements for signature before paying out the money. Many people on reading the papers change their mind and decide not to take up the terms and conditions and think that is the end if the matter. Far from it. The front company immediately processes the bank details and starts collecting the repayments, even though no loan has been paid out.

“Whist there are mechanisms that can be used to get that money back quite often this has already caused a lot of hardship. Bouncing direct debits or gobbling up benefits as soon as they hit the bank. And of course they then apply fees and further interest for ”default” and so the spiral of despair deepens.

“Staff at my constituency office have been very busy but quite successful in recovering monies from these rogues but are in disbelief at the extent of the problem and the sheer arrogance of the sales staff. One young man was driven to such despair he attempted to take his own life. He had become so desperate in December living on only jobseekers allowance that he applied to several of these online companies trying to secure a loan that would enable him to give his daughter some sort of Christmas. None of the offers were taken up by him and no money was paid out. All of the companies involved then started drawing money from his account on January and February, many hundreds of pounds. One can’t imagine the implications this had.

“I would advise that unless you know and trust the company you are dealing with online don’t touch them. I cannot see the logic which leads a company to lend hundreds let alone thousands of pounds to someone in a payday loan who has openly declared that their only income is jobseekers allowance!

“The young man in question has now had his money refunded but the consequences have left him in serious debt, what’s more the companies don’t care, confirming that there would be no compensation only refund they told my office that it was the applicants own fault for clicking that they agreed to the terms, it got better. They tried to apply an administrative fee for cancellation to be deducted from the refund. One company salesperson from a company called the Priority money club told my office manager ‘If you want to make money you should get in on it, it’s the new double glazing!’

“It is my intention to take this matter as far as I can, but in the meantime if any of my constituents find themselves in the same scenario they should contact Ron at my Dunoon office 01369 702011 we will do everything we possibly can to help.”