Morses Club borrower? It's launched a new redress scheme for mis-sold loans – here's what it means for you

Morses Club provides short-term doorstep loans of between £200 and £1,000 to borrowers in the UK who may struggle to access standard credit. In recent years, it's been hit hard by a wave of mis-selling claims for incorrectly-issued loans – and most of these complaints have been upheld, with the firm paying out more than £19 million in compensation to its customers between January 2016 and August 2022.

As a result, Morses Club has proposed a 'scheme of arrangement' – a legal agreement between a company and those it may owe debts to that caps the total amount the firm can pay in compensation. This was approved by the High Court this month and launched to borrowers today (31 May). Morses Club says it decided to use a scheme "to ensure that all eligible customers are treated equally".

Our Reclaim short-term loans guide has full help on how to check if you were mis-sold.

Who's eligible to claim under the new redress scheme

The scheme is open to an estimated 618,000 current and former Morses Club customers. You can apply if you meet the following criteria:

• You took out the loan between 1 April 2007 and 2 August 2022. If you have a complaint about a loan issued before April 2007 or after 2 August 2022, this falls outside of the scheme and will be dealt with under Morses Club's normal complaints policy.

• Your loan was mis-sold at the point of issue. If you couldn't afford the loan over its term when you took it out, it was likely issued incorrectly – meaning you'd have a valid claim. Your claim will be assessed looking at a number of factors, including your income at the time, how much you borrowed, whether you had to borrow more over the course of each year, how much of a gap there was between different loans you took out and if you were behind on payments.

You have until 30 November 2023 to make a claim – here's how

Morses Club says it's written to all of its existing and previous customers by email, letter or text message to let them know about the scheme.

If you haven't yet submitted a complaint and think your loan might have been mis-sold, here's what you need to know:

• You can submit a claim online or by post. You can start your claim on Morses Club's scheme of arrangement website. Alternatively, you can post a completed claims form to: Scheme of Arrangement Team, Morses Club Scheme Limited, Building 1, The Phoenix Centre, 1 Colliers Way, Nottingham, NG8 6AT.

• You'll be asked to provide your scheme reference number. You should be able to find this at the top of any correspondence you've been sent about the scheme. If you don't have this, or need further help, you can email contact@morsesclub.com or call Morses Club on 0333 011 0688.

• You can claim by yourself – avoid third-party claims management firms. Morses Club says the process is designed to be simple, and a claims management firm is likely to charge you for the services they provide, meaning you won't get the full amount of any cash compensation you're due.

• You have until 5pm on 30 November 2023 to submit your claim. If you miss this deadline, you won't be able to claim in the future and will lose your right to any compensation.

If you have an outstanding mis-selling complaint from before the scheme launched, your complaint may have been rolled into the scheme automatically, depending on when you first complained and when your loan was issued. If so, Morses Club should've let you know and you won't need to submit a separate claim. If you're not sure what's happened to your existing complaint, it's best to contact Morses Club directly.

It's not yet clear how much compensation you'll get – but it's unlikely to be the full amount you're owed

Generally, if you've been mis-sold a loan and make a successful claim against the lender – and it doesn't have a scheme of arrangement in place – you can expect to get back most, if not all, of the interest and fees you were charged. Since the interest tends to make up a considerable portion of the total amount you repay, these reclaims can be sizeable, running into the hundreds or even thousands of pounds.

However, under the Morses Club scheme, total payouts will be capped, as the firm will only have a limited pool of money to fund them. The firm says its compensation fund will be "at least £20 million", though it wouldn't confirm the exact amount.

Depending on how many of the firm's customers make a claim – and how many of these claims are ultimately upheld – you may only get a fraction of the full amount owed. For example, under a similar scheme from a different lender which paid out last year, claimants ended up getting 4.25p for each £1 they were owed.

Payouts are unlikely to be made until next year at the earliest. Morses Club will only start assessing claims after the scheme closes to new claimants on 30 November 2023, and the process will likely take some time – though the firm says it expects payments to be made "before September 2024".

Still repaying your loan? Making a claim could mean the outstanding balance is wiped

If you are currently paying off a loan, but think you were mis-sold, you still need to keep up with your repayments if you can, as you're bound by the loan's original terms.

However, you can make a claim under the scheme and, if it's successful, some (or even all) of your outstanding balance could be written off.

If you're currently struggling to make repayments to Morses Club, you need to consider whether to prioritise other bills instead while your claim is outstanding. Though before you stop or reduce any payments, first get one-on-one help from a debt help charity to make sure this is the right option for you in your circumstances.

The main charities that can help are Citizens Advice, National Debtline and StepChange. For more info, you can also see our Debt Help guide. 

Commenting on this, debt advisor Sara Williams, author of the DebtCamel blog, says: "In general it is probably better for most people having difficulty paying Morses Club to stop paying or offer a low affordable payment. This will harm your credit record but if you later win the claim, that negative mark will be removed from your credit record.

"If you default on other debts or don't pay important bills or borrow elsewhere in order to pay Morses Club, you are liable to be in a much worse position even if your Morses Club claim is eventually upheld."