There’s a hidden clock ticking for anyone who’s had a payday loan.
If, like many, you were mis-sold one of these often 1,000%+ APR debts, act quickly or you may miss out on reclaiming £100s or £1,000s.
Payday lending, as the name suggests, is supposed to mean borrowing £100-£1,000 to tide people over until next payday.
Yet it’s often been a hideous misery-inducing industry; pushily marketed as a quick-fix solution, not just as crucial cash for say an emergency broken fridge, but money’s been lent without due care for unneeded spending or even to fund gambling.
For many, payday loans are a flawed concept.
How many people desperate today would see such a financial improvement within a month that they could repay last month’s loan plus interest without needing more borrowing?
Irresponsible firms often pushed people to roll over the debts, keep borrowing, seeing more and more interest stack up – causing more pain.
Alongside many others, I campaigned for years for these loans to be regulated.
That eventually came in in 2014, and a 100% total price cap (not the same as an APR cap) followed the next year, e.g. so on a £300 payday loan, the most you can be charged is the original £300, plus a maximum £300 of interest and fees.
While still hugely expensive, it was an improvement.
Why I believe if you were mis-sold, you should act quickly
Relatively recently, big payday loan firms Wonga, Wage Day Advance and Juo Loans have all gone bust – often collapsing under the combined weight of mis-selling claims against them and the price cap.
While I’m far from mourning them, my main concern is, if as is likely, other payday dominoes continue to fall, reclaiming will become “first come, first served”...
- Reclaim from a solvent firm: You get back the full interest, fees, charges and eight per cent per year statutory interest for each year since you took it out (you won’t usually get the original loan back, but the interest and charges were usually bigger anyway).
- Reclaim from a firm that’s gone bust: You’re just one of many creditors (someone it owes money to) and will be lucky to get a few pence per pound of what you’re owed. This is what’s happened with Wonga customers (there’s a claims portal at claims.wonga.com if you still want to put in a reclaim).
So get your claim in ASAP while your lender is still solvent.
The payouts can be significant, as Paydayloanalice wrote on my forum: “I followed Martin’s advice after getting 16 payday loans in 2yrs.
“I received Lending Stream’s refund of over £1,600. This has allowed me to pay off a credit card, so I’m looking forward to less stress.”
No need to pay to reclaim - you can do it yourself for free.
If you believe you were mis-sold - whether on current loans or those long paid off - you can reclaim as long as you raise the case within six years of taking out the loan (in a few rare circumstances even longer).
Examples of mis-selling include:
- The company didn’t assess your finances to ensure you could afford the loan and fees. For instance, you shouldn’t have been given a £1,000 loan if you only earn £500/month.
- It didn’t make clear to you how much it would cost you in total to repay loan.
- It didn’t give you full and accurate info about how and when to pay back loan.
- It didn’t warn you not to use a payday loan for long-term borrowing or if you were in financial difficulty.
- It didn’t tell you what to do if you had a complaint.
While claims-handling firms push themselves as the route to redress, they take a decent whack of any money you reclaim. You can do it yourself for free.
I’ve full help and a free tool at mse.me/paydayreclaim, or even just write yourself to the lender explaining why you think you were mis-sold.
If the lender rejects your claim, don’t think it is over.
You then have a right to take your case to the free, independent financial-ombudsman.org.uk . More than 60% of people who do that win.
Considering a payday loan?
They’re rarely the best route.
Even credit cards are cheaper (though be careful there too) and check out if you have a local non-profit credit union that can help you via find-yourcreditunion.co.uk.
If you’re really struggling financially, get one-on-one debt counselling help with either citizensadvice.org.uk , stepchange.org , nationaldebtline.org or capuk.org .
These charities are there to help, not judge, and can take a massive weight off.