Millions could claim back unfair interest and excessive fees from payday lenders
If you’ve taken out a payday loan AND you think it was unaffordable or you were charged excessive fees then you could get a refund
MILLIONS of people who have taken out payday loans could be in line for refunds.
A rising number of people are complaining about unaffordable loans or unfair charges that were imposed on them by payday lenders and the majority of those who do are winning - sometimes thousands of pounds.
In one case seen by The Sun Online, the customer managed to claim back £10,300 in interest and fees on 40 payday loans taken out from three providers.
And there could be millions more who can claim refunds, according to Moneywise Magazine.
The personal finance magazine has covered the subject in its latest issue to highlight how people can get money back from lenders who have flouted the rules.
The number of people complaining about payday loans is rising at an alarming rate.
The Financial Ombudsman Service (FOS) says it saw an 245 per cent increase in the first half of this year, compared to the end of 2015.
It told The Sun Online that the majority of the complaints it receives come from people who claim that their loans were unaffordable.
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In the example used in Moneywise magazine, the reader, who wanted to remain anonymous, first began taking out payday loans in 2011 but this soon spiralled out of control and he found himself borrowing money just repay other loans.
He complained directly to each firm, via Resolver.co.uk, a free claims management tool, but was unhappy with the amount he was initially offered by one of the firms.
After he escalated the problem to the Financial Ombudsman Service (FOS) it ruled in his favour and he was refunded the cash. The loans were also removed from his credit file.
Since 2014, the rules imposed on payday lenders are much tougher. Firms must carry out checks to assess the ability of customers to repay loans and how taking it out will affect their financial situation.
Since January last year, payday lenders must make sure that borrowers never pay back more in fees and interest than the amount borrowed - this is known as a price cap.
The government watchdog, The Financial Conduct Authority, has also forced some payday lenders to offer cash back automatically to customers it has treated unfairly.
Earlier this year it ordered CFO Lending to pay more than £34million to 97,000 customers.
In June 2014 it told Wonga - the UK's biggest payday lender - to pay £2.6million to around 45,000 customers, after it found they had been using unfair and misleading debt collection practices.
How can you make a complaint about a payday lender?
If you feel that a lender has not performed proper affordability checks or that you’ve been charged excessive fees, you might have a case.
Firstly complain directly to the company involved. Ask for a refund of all interest and charges you paid on the unaffordable loan, plus interest on top.
You can also ask for the loan to be deleted from your credit record if it’s on there, as this could affect your chance of getting credit in the future.
If you don’t get a response within eight weeks or you’re unhappy with what they reply, then you can take your case to the FOS. It will independently review your complaint and make a decision on it.
You should be able to get back all the interest you paid on any unaffordable loan, plus excessive charges.
You can still complain if you’re in the middle of repaying your loan, within six years of taking it out or within three years of learning about the issue. For more information on how to make a complaint see the FCA's website.
The uphold rate – where the Ombudsman rules in consumers’ favour – for payday loans, was higher than the average across all financial products in the first six months of the year, at 53 per cent compared to 48 per cent.
Russell Hamblin-Boone, chief executive of the Consumer Finance Association (CFA), which represents the largest share of short-term lenders in the UK, said that the vast majority of complaints about payday loans are historic.
A spokesman from the Ombudsman said: “When considering these complaints, we would be looking at whether the lender carried out appropriate affordability checks.
“If the checks weren’t done, that doesn’t mean we automatically uphold a complaint. We’d then be looking to make an assessment of whether or not the loan would have been judged affordable, had those checks been done.”
It added that each case would be assessed on the individual circumstances.
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