Companies offering short-term loans to consumers have been urged by the financial ombudsman to prioritise the needs of their customers and warned that borrowers were already struggling with unmanageable levels of debt before the coronavirus crisis began. In recent years the Financial Ombudsman Service has dealt with thousands of complaints from borrowers who took out payday loans and other short-term borrowing that they could not afford to repay. The industry boomed after the banking crisis, when mainstream banks became reluctant to lend and consumers’ wages were frozen, but has been in difficulties since the City watchdog, the FCA, started to crack down on interest rates and lending practices. Several lenders, including Wonga and, more recently, Brighthouse, have fallen into administration as a result of the cost of compensating consumers who were given loans without adequate checks. The Financial Ombudsman Service said that it has upheld 70% of complaints against payday loan companies over the past year. Guarantor loans, where the debt is backed by a friend or relative of the borrower, were the subject of just 1,043 of the 271,468 complaints received by the ombudsman over the year, but in 89% of the completed cases it found in the customer’s favour. On Monday, it was announced that the UK’s largest guarantor loan provider, Amigo, was the subject of an investigation by the FCA. The chief ombudsman, Caroline Wayman, said: “Before Covid-19 was on our horizon, we’d also been hearing from tens of thousands of people struggling with unmanageable levels of debt. “During a year when we saw yet more lenders sink under the weight of past unfairness, we continued to raise concerns with firms in this sector about the disappointing proportion of cases where they’d failed to ensure customers’ borrowing was affordable and sustainable.” Wayman said it was time for lenders “to genuinely prioritise customers’ long-term interests”, as there was potential for borrowers to be vulnerable after the crisis. The ombudsman’s annual report showed that payment protection insurance continued to be the most complained about product, and was the subject of 122,153 complaints over the year. Just 17% of the PPI cases resolved during the year were settled in the customer’s favour. The service also reported an increase in the number of consumers complaining about credit card companies and banks refusing to pay out under section 75, which covers spending if a company goes out of business or fails to honour a contract. It said many had arisen after two large travel companies, Thomas Cook and Flybe, went into administration. The current turmoil in the travel industry could lead to many more of these cases as consumers seek refunds for trips they have been unable to take. Wayman said: “The unprecedented Covid-19 situation has already given rise to many new and complex questions of fairness when things go wrong in financial arrangements.” She said customers unhappy with how a complaint had been resolved should contact the service for free help.