If you’ve ever had a payday loan that you couldn’t afford to repay, you may be eligible to reclaim a significant amount of the money back – for free.
Following a rise in complaints and compensation claims against payday loans companies, the Financial Conduct Authority (FCA) has advised high-cost short-term credit companies to assess whether or not their creditworthiness assessments are compliant, and take appropriate action if they’re not. This crackdown on regulations has come after the demise of the payday loans company Wonga in 2018, who were criticised for mis-selling almost 400,000 loans.
In this article we explain everything you need to know about payday loan claims and refunds, answering some frequently asked questions such as ‘am I eligible for a payday loan refund?’, ‘how do you make a payday loans reclaim?’ and ‘can I reclaim if the lender has gone bust?’.
Payday Loans Refunds – In a Nutshell
Payday loans are a type of loan designed to be taken out for a short period of time. They usually involve a borrowed amount of anywhere between £50 and £1,000. This amount, plus interest and fees (which are usually very high) should then be repaid in one full lump sum either on or shortly after the borrower’s next payday. In many cases, borrowers struggle to repay their loans and therefore end up having to borrow more; facing higher interest rates and having to pay late payment fees.
As lenders, the company you get your loan from are responsible for ensuring that you have the appropriate funds you need to be able to repay the loan. If your loan was not suitable for your financial situation or the terms of the loan were not clear, you could be owed hundreds or thousands of pounds, so it’s worth checking to see if you’re eligible for a payday loan refund.
Could I reclaim my payday loan?
If you’ve taken out a Payday loan in the last 6 years and the loan was missold to you in some way, then you have the right to make a claim for a payday loan refund. If you took the loan out more than 6 years ago, you may still be able to make a claim. To find out, contact the FOS (Financial Ombudsman Service) and they will assess your case and advise you.
How do I know if my payday loan was mis-sold?
If any of the following circumstances applied to you when you took out your Payday loan, the lender may have mis-sold you your loan. This means that under rules set by the Financial Conduct Authority, you have grounds to complain to the loan provider.
- The lender did not carry out appropriate checks to ensure that you had the ability to pay back the loan in a sustainable way. For instance, did they check your financial history, employment status or the condition of your mental health at the time?
- The lender did not clearly outline the total amount of money you needed to be able to repay the loan. Did the lender provide you with a breakdown of the costs involved with repaying your loan in its entirety (including fees and charges) for each £100 they lent you?
- The lender did not clearly state the terms for repaying the loan. Did the loan provider tell you exactly how and when the loan should be repaid?
- The loan provider didn’t make you aware of late fees on their advertisements. Were there any clear late payment warnings?
- The lender didn’t inform you of their complaints procedure. Did they tell you what you should do if you’re dissatisfied with their service?
- The lender didn’t make it clear that Payday loans are only suitable for short-term use and that they shouldn’t be used by people who are in financial hardship.
- The loan provider didn’t clearly explain how the Continuous Payment Authority (CPA) works or didn’t tell you about your right to cancel it.
- The CPA didn’t inform you when they were going to take the deductions from your bank account.
I told the loan company I was struggling to repay my Payday loan and they didn’t help. Can I complain?
Experiencing difficulty repaying a loan can be distressing as it is. If you’ve been in contact with your loan provider to inform them of the issues you’re facing and they’ve still not helped, it’s likely to make your situation even worse.
If you’ve experienced any of the following when contacting the Payday loans company who you’ve borrowed from, you will be able to make a complaint:
- Your lender did not make you aware of any free debt-counselling charities who could help you with your situation.
- They pressured you into extending your loan when they knew you were struggling to repay it.
- The lender didn’t make sure you were aware of the risks that come with extending a loan.
- They didn’t make the financial implications of extending your loan clear.
- Before offering you an extension on your loan, the lender didn’t carry out the appropriate finance checks to make sure you were able to repay the extended loan.
- The loan company didn’t offer to freeze any interest or charges on payments that were due under a reasonable repayment plan.
- The loans company didn’t handle your situation in a sympathetic and positive way.
Can I reclaim if my lender has gone out of business?
If you want to make a payday loans reclaim but your lender has now gone out of business, you may still be able to make a claim with their administrator. However unfortunately, you’re much less likely to be able to make a payday loan reclaim if this is the case and if you do so, it’s likely to take much longer than if the company was still up and running.
How to submit a Payday loans claim for free
The easiest way of making a payday loans reclaim for free is to visit resolver.co.uk and use their free tool to make your claim. You should file your complaint by entering the name of your payday loan provider and if the company mis-sold you a payday loan, choose the ‘irresponsible lending’ category when starting the claim.
You will then be prompted to input the details of your situation on the Resolver tool and your case will be sent off to the loans company for review. If your issue is still not resolved 8 weeks after your claim, or you’re unhappy with the result of the claim, you should contact the Financial Ombudsman Service (FOS) who will be able to look into the case for you. It’s important that you make sure to contact the FOS within 6 months after the loan provider has rejected your claim or made you an offer.
The company refused my payday loan refund. What can I do now?
As we mentioned above, if you’re unhappy with the outcome of your complaint with the lender, you should escalate your case by taking it to the Financial Ombudsman Service (FOS). They will then investigate your case and if they believe that you have lost out as a result of the lender’s actions, they will ask the loans company to compensate you.
How much could I reclaim?
If you were mis-sold your Payday loan, the FOS state that the provider should do as follows:
- Refund any interest or charges you have paid
- Add 8% simple interest
This can amount to significant sums of money, with some borrowers receiving thousands of pounds as a result of claims they’ve made against payday loan providers who’ve mis-sold them their loans.
We hope this guide has been useful in providing you with everything you need to know about payday loan reclaims and wish you the best of luck if you do decide to make a claim.
