How to Reclaim Mis Sold Payday Loan Charges Yourself
Have you ever had a payday loan? If, like millions of people in the UK, the answer is yes, it’s likely you could be due a refund of some of the charges and interest you faced – but how do you make it happen? In this quick guide, we’ll walk you through everything you need to know.
Why are people getting refunds?
When it comes to refunds, you might think you’re not generally lucky enough to qualify or that you haven’t been badly treated by any payday loan company – so it’s important to understand exactly why people have been getting refund – it’s very common.
The refunds and compensation tend to relate to the checks that every lender should do before they give you a loan. Since the 2008 financial crisis, strict new laws have been put in place to make sure every money lender checks a person’s affordability level before offering them a loan.
It’s reasonably simple; your incomings need to cover your living costs and outgoings (including a new loan). If they do, and you fit their other lending criteria, they can responsibly offer you a loan. If you don’t – they shouldn’t offer you the money – as it could put you in further financial hardship if you can’t make the payments.
The trouble is, these affordability checks have been missed in a huge number of cases – and it’s led to people borrowing money they simply cannot afford to pay back. What’s worse, many payday lenders have offered people additional loans when they can’t afford to pay back the original one – a practice that’s often called ‘rolling’ a loan.
Rolling a payday loan
The chances of being able to reclaim charges on a payday loan are increased if you’ve ever ‘rolled’ one payday loan into another.
In a lot of cases, that’s been done because the person can’t afford to repay the original loan. Here’s an example of how it happens:
You borrow £200 and therefore need to repay £250 at the end of the month. When the end of the month comes around, you can only afford to repay £100 – so rather than take any money from you – the company suggest another loan. They lend you £250, which pays off the original loan, but then you owe £320 at the end of the month… and so on.
This ‘rolling’ process has been very common – and while it offers people a bit of breathing space, it very quickly adds an enormous amount of money on top of what you originally borrowed. Rolling a loan like this isn’t against the Financial Conduct Authority rules – but you should have undergone affordability checks every time it happened – any many people haven’t.
Are you due a refund?
Everyone’s circumstances are different – so we can’t say for certain whether you’re owed any money – but there’s a few questions that might help you decide if it’s likely.
Have you had a payday loan in the last 8 years?
This might sound like a trick question – but not all ‘payday’ lenders market themselves as such. They might call their service an ‘emergency short-term loan’, a ‘cash advance’ or something similar – but these are generally other terms for payday loans.
If you’re not sure, check back over your letters and bank statements. If you’ve dealt with companies like Wonga, QuickQuid, The Money Shop, Sunny or others – you’ve ticked the first box.
Was the loan rolled?
There’s absolutely no shame in not having the means to repay a payday loan when you thought you might – in fact, most people who use payday lenders have between 4-6 loans over the course of a year, so rolling loans into bigger loans to avoid repayment is very common.
If you remember this happening, it’s another indication that you could be able to reclaim some charges.
Have you had more than one payday loan at once?
Payday lenders need to check all of your outgoings when they assess your affordability – if they miss or ignore anything, they’re putting your financial well-being at risk.
One of the most commonly missed or ignored outgoings is other payday loans. In an ideal world, they’re only used for very short-term borrowing – but if you can’t pay it back on time, you’ll end up with massively increased outgoing next month.
Does it add up for you?
One of the very best ways to think about payday loans is to simply ask if you’ve struggled repaying them. If you have, it’s an indication that you perhaps couldn’t afford it in the first place. Again, this is nothing to be embarrassed about – it’s a lender’s responsibility to decide on affordability – not yours.
If any of these things sound familiar – or payday loans have simply caused you problems, you should look into taking your claim further. To do so, you’ll need to:
Gather all your paperwork together
This should include any agreements you’ve signed or information about terms and conditions. Don’t worry if you don’t have it – you can request it from the companies you’ve borrowed from.
Think about the problems
What happened that causes you problems? Were loans rolled? Did your lender take payments without your say so? Have you struggled to make repayments?
Mark down any issues you can think of and rough dates they happened.
Write to the companies
Writing is better than talking on the phone – as you’ve got records to go back to. In your letter, you should include:
A clear indication that you want to complain about the way your loan was handled
A quick timeline of events – when you took the loan out, the problems, any support the company offered
Information about any hardship you faced because of the repayments
What you would like the company to do for you – i.e. repay any additional charges you had to pay, pay back additional interest you were charged – etc
How you intend to speak to the Financial Ombudsman Service if they don’t handle your complaint within 8 weeks
Don’t worry if you’re not totally sure about any of the above – or putting a letter together. Your local Citizens Advice service will be able to talk to you in a little more detail about anything you need some support or advice around.
Talking to the Financial Ombudsman
Although you have to give the companies you’re discussing reclaimed fees with chance to resolve your complaint first, you can talk to the Financial Ombudsman if they haven’t dealt with you correctly after 8 weeks.
You’ll need copies of all your paperwork and correspondence – but the person you talk to will be an expert in cases of this kind and will quickly get things tied up for you. You can call them on 0300 123 9 123 or 0800 023 4567 – or find in-depth details of how to make a complaint at www.financial-ombudsman.org.uk.
*Up to 85% of debt can be written off in some individual cases. Depending on your own situation, the amount which can be written off will vary from person to person. Realistic levels of debt to be written off are between 20% and 85%, however this depends on your current credit policy, income and personal assets.
Your information will be passed to a third party organisation working on a model of none advice. These advisors will be able to talk through IVA (Individual Voluntary Arrangement) opportunities with people within England, Wales and Northern Ireland. Help can only be offered following a thorough fact-finding process. When an individual meets the required criteria for an IVA, advice can then be provided.
Help and advice given will be through registered insolvency practitioners with all necessary expertise. Debt Advisory Service, along with any third-party organisations, will not give advice with regards to Debt Management Plans (DMPs). Professional debt counselling and credit services are available free of charge from specialist Money Advice Services.
If Debt Management is the option you want to proceed with, All advice will be provided by the Debt Management company.