Reclaim payday & other short-term bad credit loans
Get £100s or £1,000s back for being mis-sold for FREE
Payday loans and similar types of high-cost short-term credit have faced significant issues with mis-selling. Despite variations in their terms, these loans uniformly come with high expenses, primarily targeting individuals with low credit scores and frequently offering accessibility that surpasses prudence. If you found yourself unable to meet repayment obligations or if the lender neglected proper financial assessments, you might have grounds to reclaim substantial sums, potentially amounting to hundreds or even thousands of pounds.
What is a payday loan?
Payday loans are specifically crafted to provide quick financial relief, typically ranging from £100 to £1,000. True to their name, these loans are intended to bridge the gap until your next payday, requiring repayment of the borrowed amount in full along with accrued interest.
The issue lies in the accessibility of payday, short-term, and bad credit loans, which are often obtained with minimal difficulty. Consequently, numerous borrowers fall victim to deceptive practices employed by loan companies and make poor borrowing decisions, leading them to struggle with loan repayment. This often results in accruing exorbitant interest charges or resorting to additional borrowing to manage their financial obligations.
Payday loans are for most a flawed concept
The foundation of the payday loan industry rests more on marketing strategies than genuine necessity. By persuading individuals of their supposed need, they artificially stimulate demand and promote their products aggressively. However, payday loans prove to be inherently flawed for many. Consider how likely it is that someone facing immediate financial strain could experience such a significant improvement in their situation within a single pay cycle. Would they not only cease requiring further loans but also manage to repay the previous loan, which includes substantial interest charges?
It became too convenient – some even shared stories of intoxicated individuals returning home, tuning into televised gambling, encountering Wonga’s advertisements, and impulsively clicking to receive instant cash at a staggering 5,000% APR for betting. With numerous unable to meet repayment obligations, payday lenders coerced individuals into signing unethical contracts allowing direct withdrawals from their bank accounts without consent.
Over the past decade, payday loans have been widely mis-sold
According to legal requirements, lenders must verify your ability to repay a loan before granting it to you. However, there has been evidence suggesting that numerous high-interest loans, such as payday loans, were approved without sufficiently thorough checks. Moreover, many borrowers facing difficulties in repaying these loans reported inadequate treatment from lenders during the process.
This is a significant matter: during January to March 2021, the Financial Ombudsman Service (FOS) ruled in favor of over 60% of complaints concerning payday loans, sharply condemning the conduct of these lenders as “unacceptable”.
Follow our step-by-step guide to find out whether you’ve got an eligible complaint and, if so, how to make a reclaim.
Those with logbook, instalment, doorstep & rent-to-own loans may be impacted too
Payday loans represent just one category among several types of short-term, high-cost loans available for individuals with poor credit. Similar to payday loans, these financial products are typically accessible with relative ease.
Regardless of the specific loan type you acquire, it is imperative that your lender conducts a thorough assessment of your ability to manage repayments and treats you equitably. Should they fail to do so, you retain the right to raise a complaint and potentially seek redress.
If you have ever obtained any of the following types of loans, proceed to the initial step to determine if you are eligible to file a legitimate claim:
- Logbook loans. Logbook loans are a type of loan where a vehicle, such as a car, truck, van, or motorbike, serves as collateral. This means that the lender retains ownership of the vehicle until the borrower repays the loan in full. These loans are specifically utilized in England, Wales, and Northern Ireland, but they are not offered in Scotland.
- Instalment (or short term) loans. An installment loan, often referred to as a “short-term loan,” bears similarity to a payday loan but distinguishes itself in a crucial manner: while a payday loan necessitates repayment of the entire loan amount plus interest in a single payment, an installment loan allows borrowers to amortize their repayment over time, typically through monthly or weekly installments, thereby easing the financial burden.
- Doorstep (or home credit) loans. Doorstep lending – also called home credit – is where a collector comes to your house to take your repayments. Like instalment loans, you won’t pay back the loan as a lump sum, but rather, you’d make weekly repayments.
- Rent to own. Rent to own allows you to spread the cost of household items over time rather than paying the entire amount upfront. After completing your payment plan, ownership of the item may or may not transfer to you, depending on your specific agreement. Alternatively, you may have the opportunity to buy or upgrade the item for an extra fee, or return it altogether. Since 2019, a new regulation has capped the total interest and fees you can be charged at the product’s original cost. For example, if an item costs £89, the maximum additional charge you can incur is another £89.
Guarantor loans – where a nominated ‘guarantor’ is responsible for any payments the borrower is unable to make – have also been widely mis-sold.
We cover what both borrowers and guarantors need to look out for, along with specific reclaim advice in our full Reclaim mis-sold guarantor loans guide.
Step 1. Had a payday loan? Check whether you can claim
We’ve two checklists for those who want to make a complaint: one for if you think you were mis-sold the loan, and one for if you if you feel like you’ve been treated unfairly by the lender.
Work through each, and if you think you fit into one – or more – of the categories head to step three to get your complaint started.
Important: It doesn’t matter whether you have an ongoing loan or you’ve already paid it off, you can STILL make a reclaim, as long as you raise the case within six years of taking out the loan. However, if the lender you had the loan with has now gone bust, the process may be slightly different – head to my lender has gone bust for full information.
The mis-selling checklist
Prior to extending any loan—whether it’s a payday loan or another form of short-term, poor credit loan—lending institutions are obligated to conduct a thorough assessment of your financial situation to ensure you can manage it. They MUST also provide you with comprehensive information. If your lender fails to adhere to these guidelines, you have grounds to file a complaint.
This requirement isn’t merely a courtesy; it’s a fundamental aspect of the customer service charter and regulatory framework established by the Financial Conduct Authority (FCA), which oversees all financial firms operating in the UK.
If you fall into any of these categories of potential mis-selling, you likely qualify to lodge a formal complaint:
- The lender didn’t properly check your finances or personal situation to make sure you’d be in a position to pay back the loan. Determining this can be quite challenging. However, if you find it difficult to meet your loan obligations or if the payments are causing financial strain, and there haven’t been substantial changes in your circumstances since obtaining the loan, you may find yourself in this situation.
- The lender didn’t make clear to you how much it would cost you in total to repay the loan. You should have been given an example of the price for each £100 borrowed, including fees and charges.
- You weren’t given full or accurate information about how and when to pay back your loan. Take, for instance, the lender’s oversight in explaining the mechanics of continuous payment authorities (CPAs). These CPAs serve as a common method among loan providers for automatically withdrawing payments through a debit or credit card on a recurring basis.
- The lender didn’t tell you that your type of loan should not be used for long-term borrowing or if you’re in financial difficulty. You should have also received sufficient warnings regarding best practices for loans in your loan agreement or within the loan’s terms and conditions.
- You weren’t told by the lender what to do if you have a complaint. This means it was unclear to you how to deal with any issues you might have had with the loan.
- The lender didn’t include a risk warning about late repayment in its advertising. This includes online advertising, or advertising that was sent to you by email or text message.
The BIG sign you’ve been mis-sold is if you can’t afford to repay the loan. But it’s not the only reason…
If you were treated unfairly, you could also be due redress
There are various reasons beyond being mis-sold where you may raise a complaint. Once you’ve taken out a loan, you become a client of the lending company, which is obligated to handle your case fairly. If they fail to do so, you might have grounds for a complaint and potential compensation.
This checklist further outlines typical instances of ‘unfair treatment.’ However, even if your circumstances don’t align with the examples listed here but you believe you weren’t treated appropriately, you could still have a valid basis to pursue a successful claim.
- The lender didn’t deal with you “sympathetically and positively”. For instance, when you informed them about your difficulties in repaying the loan, they failed to provide assistance or inform you about the available alternatives.
- The lender didn’t offer to freeze interest and charges if you were unable to make payments under a reasonable repayment plan. If you find yourself genuinely unable to meet your loan obligations, your lender is obligated to provide assistance. This may involve devising a feasible alternative payment plan together with you, or potentially suspending interest charges on the loan.
- The lender didn’t tell you about free and independent debt-counselling organisations. If you tell your lender that you’re struggling to afford your repayments, they should sign post you to appropriate independent financial help.
- The lender pressured you to extend the loan. Or didn’t tell you about the risks and costs of extending the loan.
- The lender didn’t sufficiently check your finances or personal situation to make sure you’d be in a position to pay back the extended loan. Just like during the initial loan application, the lender must conduct financial assessments to verify the affordability of any loan extensions or increases. It can be challenging to confirm whether these checks were indeed carried out. However, if you find it difficult to make payments and your financial situation remains largely unchanged, it suggests the lender may not have thoroughly assessed your ability to repay.
Step 2: Check if your lender’s in business (as this affects how much you’ll get)
If you win your claim, the amount you’ll get paid will be based on putting you back in the position you’d have been in had you been treated fairly, or not mis-sold, in the first place. This usually means you’ll be entitled to a refund of any interest or fees you have paid.
However, the amount you’ll actually get back depends on whether your lender is still in business or not.
Lender’s still operating? Here’s what you could get
It’s crucial to grasp that you will not receive a refund equivalent to the initial loan amount. Since you’ve already utilized the loan funds, you won’t be reimbursed for that sum (and you’ll need to continue making payments if the loan hasn’t been fully repaid yet).
Over the years, we’ve observed reclaim amounts spanning from tens to thousands of pounds. However, as a fundamental guideline, the outcome remains consistent – regardless of whether you were a victim of mis-selling or faced unfair treatment.
- You will likely be refunded interest PLUS any fees and charges from the time you were mis-sold or deemed to have been treated unfairly. You’ll receive a refund of both the interest and any associated fees and charges because these expenses would not have been incurred if the loan had not been improperly sold to you initially.
A successful claim for mis-selling typically results in the reimbursement of MOST, if not all, of the interest, fees, and charges (if applicable) since the mis-sale occurred at the loan’s inception. Given that interest constitutes a significant portion of your total repayments, these refunds can be substantial.In cases where a claim is successful due to unfair treatment, the refunded interest, fees, and charges will pertain to the period when the unfair treatment occurred. Some customers may discover that they were treated unfairly from the outset, entitling them to reclaim most of their interest, fees, and charges. However, others might receive a proportionately lower amount. - You can claim interest on the total amount of your refund. In addition to receiving a refund, you are entitled to claim an 8% annual interest on payments from the date they were made until the date of settlement. Here’s a practical illustration:For instance, if you received a £1,000 refund from a specific loan exactly four years ago, you would also accrue 8% interest on the £1,000 (£80) for each of those four years. Therefore, the total interest accumulated would be 4 x £80 = £320.
- You can request for ‘black marks’ on your credit report to be removed. In addition to receiving a refund, you have the option to request the removal of any negative payment records related to loans considered ‘unaffordable’ from your credit report. This process isn’t automatic, but when using our reclaim tool, Resolver will guide you to ask your lender for this action. The credit reference agencies follow the lender’s instructions, so it’s the lender’s responsibility to initiate the removal of any adverse marks.
- For loans secured against an item or tied to a purchase – such as logbook loans and rent-to-own, you can expect a refund on the interest and charges and the following:
- For logbook loans, if the vehicle has been repossessed the firm will be asked to return it. If they’re unable to do so (if the vehicle has been sold, for example), then you should be compensated for the value of the vehicle.
- For rent-to-own, getting the repossessed goods back would not usually be in your best interest. The Financial Ombudsman has affirmed that the return of any repossessed items typically necessitates the reinstatement of agreements, a step it would advocate only when it benefits the customer. However, in situations involving customers facing financial challenges, this is often not the case.
If your claim is rejected, or you’re not satisfied with the final offer from the lender, it’s simple to escalate it to the Financial Ombudsman Service (FOS).
In some extreme circumstances, the FOS told us you could get the remainder of the loan written off.
– If your loan is with ANY of these payday lenders – you can still claim
While many payday lenders have gone into administration, there are some that are still in business. Here are some of the main lenders, if you had a loan with any of them and believe you were mis-sold, start your reclaim today.
Lending Stream, Fernovo, Ferratum, Mr Lender, Moneyboat, Smart Pig, CashASAP, CashForUNow, Fast Loan Uk, LoanPig, Kabayan, MyKredit, Oakam, QuidMarket, Savvy, WageMe, Wizzcash.
Lender’s in administration? You’ll likely get less
You can still file a complaint for mis-selling even if the company has already collapsed. However, delaying your complaint until that point will drastically diminish the potential refund amount. Therefore, the key advice remains unchanged: Act promptly and submit your complaint without delay to maximize your chances of receiving a meaningful reimbursement.
In the event your lender enters administration, it’s crucial to lodge your claim with the administrators, not directly with the lender. Typically, a straightforward form will be provided for completion, and pertinent details should be available on the lender’s website. While the reimbursement may be limited, a successful complaint can lead to the removal of adverse marks from your credit file. Additionally, if you are still repaying your loan, any compensation for mis-selling could potentially reduce your outstanding balance.
The amount you receive hinges entirely on the remaining funds and the number of creditors with claims to divide it among. Regrettably, customers of payday lenders are considered low-priority creditors and are placed at the bottom of the list. Timing of claim submissions also does not guarantee higher payouts; outcomes are determined solely by the administrator’s decisions.
A case in point is Wonga, where customers received a mere 4.3% of their owed compensation. Thus, if you were entitled to £1,000 in compensation, you would have received just £43.
– Morses Club is now in administration and it is too late to make a claim – but some will receive payouts
Morses Club has entered administration, preventing any new claims from being filed. Nonetheless, those who lodged complaints under Morses Club’s arrangement scheme will have their cases reviewed, with eligible individuals receiving payments from the ‘Early Termination Fund’. Morses Club anticipates insufficient funds to fully reimburse all claimants. Updates will follow as new information emerges.
If you maintain an outstanding loan with Morses Club, please continue making payments as usual until further instructions are provided.
– What happens if my lender goes into administration while I’m still paying off my loan?
If your lender becomes insolvent while you’re repaying a loan, you’ll probably need to keep making payments unless instructed otherwise by the administrator. However, you still have the right to lodge a complaint. There are situations where any compensation owed due to mis-selling might be deducted from your outstanding loan. Additionally, you may also be entitled to a refund of interest and charges.
Lender’s in liquidation? You can’t claim anymore
After the period of administration is over, the company will be “liquidated” and it will then be too late to make a complaint.
You can now no longer complain to any of these lenders: Wonga, Wageday Advance, the Money Shop, Payday UK, Payday Express, QuickQuid, Provident, Satsuma, Glo, Greenwood, Loans at Home and Pounds to Pocket.
Step 3. Start the complaint process
If you’ve gone through the lists above and think you fall into either (or both) of the ‘mis-sold’ or ‘treated unfairly’ categories, the complaints process is quick, simple and (importantly) free.
Just use our free online reclaim tool via complaints site Resolver or use our template letters – you can use the tool for payday loans or any other short-term, bad credit loan.
If you raise a complaint with your lender through Resolver, it can also expedite your case. If your complaint is declined, you receive no response, or you are dissatisfied with the final offer, Resolver will guide you to contact the Financial Ombudsman Service (FOS) after eight weeks. The FOS will review your case, provided you escalate it within six months of receiving a rejection or final offer letter.
You don’t need to use a claims management firm
Claims management firms may advertise as ‘no win, no fee’, but if you do secure a payout, some charge a huge fee – between 24% and 36% including VAT.
Shockingly, 60% of people who went as far as the ombudsman to get compensation last year for mis-sold payday loans faced losing a hefty portion of their payout in fees to claims management firms.
Don’t want to use Resolver? Use our free template letter to do it yourself
If you prefer not to utilize the online tool, you have the option to directly submit your complaint to the payday lender.
Contact the payday lender or visit its website to find the address of their complaints department. It is generally recommended to submit complaints in writing, but if this is challenging, feel free to call instead. Ensure that your concern is formally documented as a complaint and request written confirmation.
You don’t need to adopt a formal tone. Simply explain your issue clearly, succinctly, and honestly, as if you were explaining to a friend why you feel wronged. To assist you, we have prepared a template letter to get you started – download it and fill in the necessary details. (Use the template as a starting point, but the more you can personalize it, the better.)
Template letter: Bad credit loan reclaim.
Important: Keep a copy of the template letter – it’ll be helpful if you end up needing to go to the ombudsman.
At this stage, reclaiming’s like a game of ‘who blinks first?’ Your payday lender may say “no”. But if that happens, don’t worry. You can take your case to the FREE ombudsman (see below).
Lender in administration? You’ll need to complain direct
If your lender has entered ‘administration,’ you won’t be able to utilize the Resolver tool. Instead, you must file a claim directly with the administrators. Typically, there’s a straightforward form for you to fill out, and you can find the necessary details on your lender’s website. While the amount you receive may be limited, winning your complaint is crucial because it allows you to request the removal of any negative marks from your credit file.
In some instances, lenders in administration may attempt to establish a ‘scheme of arrangement,’ which requires approval from a regulatory body and creates a fund to compensate all valid claimants. In such cases, the lender will establish a ‘scheme portal’ (often an online form) through which you can submit your complaint within a specified timeframe. Once this period expires, the portal will close, and no further complaints will be accepted.
Step 4. No response? Rejected? Escalate your case for FREE with the Financial Ombudsman Service
If you don’t hear back from the lender after eight weeks, your complaint’s rejected, or you’re not happy with the response, you can escalate your claim to the free, independent Financial Ombudsman Service. This is the official, impartial body for settling disputes between individuals and financial companies.
To begin your complaint, you’ll need to fill in the ombudsman complaint form.
As with the first letter to your lender (which you could always copy and paste into the form) don’t feel you have to be formal. Explain the point clearly, concisely and honestly, in your own words, just as if you were explaining the situation to a friend.
For help to fill it out: Complaint form help.
If you need help filling this in, you can call the FOS on 0300 123 9123 or 0800 023 4567, and it’ll guide you through the claim, or use our step-by-step guide above. It’s written in Microsoft Word so you can easily cut and paste sections or print it and have it next to you as you’re filling in the ombudsman’s form.
You can send it back by post or fill it in online. Attach any paperwork to back up your case.
The ombudsman will send you a confirmation letter to say it’ll look into your case and get back to you if it needs any more information.
The ombudsman will decide whether the circumstances under which the payday loan was sold were unfair, then decide what redress is required.
You can’t use the FOS if your lender has a scheme of arrangement in place, but you can appeal
If you make your claim as part of a scheme of arrangement, the Financial Ombudsman service won’t be able to get involved if you’re not happy with your lender’s decision. However, if you think you’ve been treated unfairly, or that the wrong decision has been made you CAN appeal, and your complaint will be looked at by an independent third party.
How you appeal will vary by lender, but you should be able to find the information on the relevant scheme website, or in correspondence you’ve received about your complaint.