The cold, hard monetary values aside, debt comes at a cost.
More than eight million people in the UK are currently having a real struggle to repay what they owe. Credit card and finance debt on top of a person or family’s normal commitments is a massive burden to carry – even more so when the debtor has little or no chance of chipping away at the millstone around their neck.
The price to pay for unaffordable debt is more than merely financial, however. More often than not, a vicious circle emerges, with the psychological distress and anxiety – as well as the social stigma attached to outlandish outgoings – prompting further disorder for a spiralling debtor.
And the cost to a person’s quality of life cannot be underestimated.
Heavy debt can override any positives in a debtor’s life – whether that’s self-imposed isolation for those too embarrassed to seek help, a lack of sleep adding to overriding stress and increased anxiety or an inability to eat healthily in favour of cheaper food options.
What is most galling for those struggling to meet their arrears is the so-called ‘poverty premium’, which means those who can afford to pay the least have to fork out more for their essentials or for finance.
It isn’t that those with unaffordable debt are necessarily lacking the fortitude when it comes to shopping around for better finance deals. It’s more accurate to say that those in a better position to shop around generally have access to the better deals.
It is an unfair fact of life that the more limited your choice, be it energy deals or credit agreements, the more it will cost you. The best deals seem to be reserved for those with the best credit rating. And the less choice you have about where you source your credit, the more it will cost you.
Household furnishings and white goods bought at stores with monthly repayment arrangements come with high interest rates attached to what are already less-than competitive prices. Many of their target market simply don’t have other options, however.
It shouldn’t be this way.
Lenders have a responsibility to lend only what their customers can afford to repay. The bell has sounded to end one school of thought – that if the borrower faces a real, long-term struggle to clear the debt but does so eventually it means it was affordable.
The fact is that if granting a loan causes hardship to a borrower it was, by its very definition, unaffordable. And if paying off a loan left you needing to borrow again, whether that is from the same lender or not, it was unaffordable and therefore loaned irresponsibly.
Many of those eight million UK debtors are victims of unaffordable lending.
Banks and finance companies, and especially payday loan firms, have a duty to carry out effective affordability checks before saddling their customers with expensive debts.
Failure to do that is definitely irresponsible lending.
And their responsibility increases in line with the desperation their borrower is experiencing. They still have an obligation to ensure their loan is affordable. Not doing so is a clear failure to lend responsibly and flouts Financial Conduct Authority regulations.
Irresponsible lending is an unethical practice and exploits borrowers’ vulnerability by mis-selling financial services that do little or nothing to improve their situation.
Barings Law can help to claim compensation by holding lenders to account for their actions.
It is the lenders’ statutory responsibility to only lend affordable loans, rather than profiting from tying their customers down to crippling long-term debt. Not doing so is unethical and can be grounds for a compensation claim.
Contact our customer service team by calling 0161 200 9960 or via email at firstname.lastname@example.org to start a claim for compensation if you feel you have been sold an unaffordable loan in an irresponsible manner.
We are passionate about providing fair representation for our clients and obtaining justice for them by securing the compensation they deserve.
Barings Law’s team of experts are ready to take on your case on a no-win no-fee basis.
If you feel your financial circumstances haven’t been taken into account, and the affordability of your loan or loans is in question, speak to a professional.
We work on a no-win no-fee basis so there is no financial risk to you. You won’t pay anything up front and if we don’t win your case for you, you won’t pay a penny for our services.
Payday lenders in particular have done very well out of lending to those with a poor credit history, selling loans with sky-high interest rates (for instance Amigo’s maximum interest rate is 49%) without conducting affordability checks, meaning many of their customers have only increased their financial hardships as they struggle to break free from debt.
That is irresponsible lending and – while payday lending companies are not alone in this practice – action is under way to recover struggling customers’ money.
Of course, helping borrowers get a firmer grip on their rights is a fundamental step in righting the wrongs that have been taking place in recent years.
Whatever the circumstances, lenders still have a duty to ensure their customers are being sold financial services responsibly and that trying to keep up the repayments will not have a negative impact for their customer in the longer term. A failure to consider the financial difficulties of borrowing (or repeat borrowing) is cause for an unfair relationship.
Lenders’ negligence in fulfilling their duty of care is irresponsible and means the customer was treated unfairly.
If you believe you have been made a victim of unaffordable lending (and around two thirds of complaints made against payday lenders are upheld) contact Barings Law to see if you can make a claim for compensation.
Our experts are ready to help you get what you are owed. Call us on 0161 200 9960 or click the icon at the bottom of this page to use our webchat facility.