Reclaim payday loans for free
Get £100s or £1,000s back for mis-selling without using a claims firm
Did you get a payday loan that you couldn't afford to repay as the lender didn't check your finances properly or kept trying to sell you it again and again? If so you may be able to reclaim £100s or even £1,000s.
Claims management companies have been pushing this reclaim industry, but you DON'T need to pay to claim. There's been a surge in successful claims and this short guide shows you how to reclaim for FREE using our tool.
In this guide
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What is a payday loan and why are they flawed?
Payday loans are designed to be short-term loans of £100 to £1,000 that – as their name suggests – tide you over to the next payday, at which point you have to pay it back, plus the interest accrued.
They're often far too easy to get and many borrowers have been stung by tricks used by payday loan firms, as well as their lending decisions, and have ended up struggling to pay it off, running up hideous amounts of interest.
Following the demise of the UK's largest payday loan firm, Wonga – partly down to the increase in people reclaiming for mis-sold loans – MSE founder Martin Lewis said:
The payday loan industry was built on the back of marketing, not need. They sold people the concept of a need to create a demand, then pushed products. Payday loans are for most a flawed concept. How many in dire need this payday would see such an improvement within a month that they not only not need to borrow again, but could repay last month's loan plus the huge interest?
It made it too easy – some even told anecdotes of drunk people, coming home, watching gambling on TV, seeing Wonga's ads then pushing the button for instant cash at 5,000% APR to bet with. And as many couldn't afford to repay, payday lenders made people sign up to immoral agreements that meant cash could be taken directly from their bank accounts without request.
Before lending to you, payday loan firms – as part of the Good Practice Customer Charter and the rules imposed by the Financial Conduct Authority (FCA) – should check your finances to make sure you can afford it and also give you all the key information. If a payday lender hasn't followed these rules then you have grounds for a complaint.
Quite simply, the main reason you may have been mis-sold a payday loan is because you should never have been lent the money in the first place – as you could never have afforded to pay it back.
For example, if you earn £400 a month and you get given a payday loan for more than this, it should be clear to the payday lender that you wouldn't easily be able to pay back the loan – in fact you would probably get into a situation where you needed to borrow more money to try to pay back the original loan.
The Financial Ombudsman Service (FOS) said it received 17,256 complaints about payday loan lenders in 2017 and upheld 61% of complaints received – and as payouts can be worth £1,000s, it's worth checking if you were mis-sold.
You can claim a refund from existing loans and loans you've already paid off, as long as you raise the case within six years of taking out the loan (if it's longer than six years, contact the FOS as in some circumstances, you may still be able to claim). Here are the main mis-selling categories. If you fit one or more of these, you're likely to have a case:
- If the lender did not 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.
- The lender did not sufficiently check your finances or personal situation to make sure you'd be in a position to pay back the loan. Here you can take such factors into account as your age, mental health, employment status, income, expenditure, proof of identity or financial history.
- The lender didn't tell you that a payday loan should not be used for long-term borrowing or if you are in financial difficulty.
- You weren't told by the lender what to do if you have a complaint.
- The lender didn't make clear to you how continuous payment authority (CPA) works – where you agree to pay off the loan by making a series of deductions from your credit or debit card – and your right to cancel it.
- The CPA didn't tell you in advance that it was going to take money from your account.
- The lender didn't include a risk warning about late repayment in its online advert, or in an advert that was sent to you by email or text message.
If you've had problems repaying the loan, you can complain if your payday loan lender:
- Didn't deal with you "sympathetically and positively".
- Didn't offer to freeze interest and charges if you were unable to make payments under a reasonable repayment plan.
- Didn't tell you about free and independent debt-counselling organisations.
- Pressurised you to extend the loan.
- Didn't tell you about the risks of extending the loan.
- Didn't make clear exactly how much it would cost to extend the loan.
- Didn't check your personal finances and general situation to see if you were able to pay back an extended loan.
Since Wonga went into administration in August, the Financial Ombudsman Service has been unable to tell us whether funds will be available to settle complaints. All it has said is:
We are aware that Wonga has gone into administration. Due to the nature of the business, there is no protection offered to consumers under the Financial Services Compensation Scheme (FSCS) in this instance. We are working with the administrators, Grant Thornton, to clarify the impact on the cases we have with us and whether we'll be able to work any new cases brought to us. We do not yet know what, if any, funds will be available to settle complaints.
If you have an outstanding loan with Wonga, you should continue to make repayments until you hear otherwise from the administrators.
We will update this guide when we have more information, which will help shape the future of the industry in a similar situation.
We do know there is no protection offered to consumers under the FSCS – which safeguards up to £85,000 when a financial firm fails – as payday loan lenders aren't included in the scheme.
It's all about being put back to where you should have been if you'd been treated fairly and responsibly in the first place and we've seen reclaims ranging from £100s to £1000s so far.
You should get all of the interest, fees and charges back, which will usually dwarf the original loan. You're also due 8% interest on the interest, fees and charges each year, dating back to when you first started paying them. For example, if your refund was £1,000 from one loan exactly four years ago, you'd also have 8% of £1,000 (£80) added for each of the four years, so 4 x £80 = £320.
As you should first try to get your money back from the payday loan lender via our free tool below, make sure you know what you're due, so you're not short-changed. 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) – see below.
In most cases, you won't be refunded for the loan itself, though in some extreme circumstances, the FOS told us you could get the remainder of the loan written off.
As well as a refund, you can request that any poor payment records on loans deemed to be 'unaffordable' are removed from your credit file. It's not done automatically, but if you use our tool, Resolver – which we worked with to create it – will prompt you to request that bad marks are removed.
As the lender itself has to remove the marks (which means you may not be able to do this if your lender has gone bust), it's a good idea to check each lender actually does this by checking your credit report via MSE's free Credit Club. Bear in mind that it can take a month for credit files to be revised.
Some inspiration... 'I got over £5,000 back'
MoneySaver Woody53 wrote in our forum that after seeing the news regarding payday loan mis-selling, they contacted five companies and have so far received over £5,000 back:
From early 2011 until mid-2014 I was caught in the payday loan trap. I borrowed the money and paid every penny back, which I would estimate to be £15,000 over the years. I saw all the news regarding payday loan companies and irresponsible lending, so I decided to try to get a few quid back myself.
So far I have been in contact with five of the companies that lent me multiple loans at the same time with many rollovers too [paying a fee to extend the loan's due date]. I've received four apologies and offers totalling over £5,000 and the other complaint is now with the ombudsman. From the initial email sent I had the money back within eight weeks.
So following the offer of £250 from QuickQuid I took my complaint to the Financial Ombudsman Service (FOS). They were absolutely fantastic and upheld my complaint in full and told QuickQuid to refund all interest and charges and a small amount of additional interest. Total refund of £2,580.
I just got £250 back and a removal of the loan from my credit history. To be honest, I could probably have taken it onwards with the FOS and got a bit more, but I'm happy enough with what they've offered.
Ignore the claims management firms that say they will do it for you – they'll take a significant chunk of whatever you get back. It's simple to do it yourself for free.
If you've read the above and think you've been mis-sold a payday loan, you can make a claim using our free online reclaim tool via the complaints site Resolver.
If you complain to the payday lender via Resolver, it'll help escalate your case too. It will prompt you to contact the Financial Ombudsman Service after eight weeks, so if your complaint's rejected, or you don't hear back or aren't happy with the final offer, the FOS will look at your case (though you must escalate it within six months of the rejection/final offer).
We know some people would prefer not to use the online tool, so if you prefer you can submit your complaint directly to the payday lender, using our free template letter to help.
Speak to the payday lender or check its website for the address of the complaints department. Generally these things are best done in writing, but if that's too difficult, don't worry about calling. Just ask it's noted down as a formal complaint, and also ask for written confirmation.
Don't feel you have to be formal. Just explain the point clearly, concisely and honestly as if you were explaining to a friend why you've been wronged. To help, we've put together a template letter to start you off – download it and fill in the blanks. (Use it to help start you off, but the more you write in your own words, the better.)
Template letter: Payday loan reclaim
Important: Keep a copy of the template letter – it'll be helpful if you end up needing to go to the ombudsman.
But there's something crucial you need to understand. At this stage, reclaiming's like a game of 'who blinks first?' Your payday lender may say "no". If so, don't worry. You can take your case to the FREE ombudsman (see below).
If you don't hear back from the lender after eight weeks or your complaint's rejected or you're not happy with the response, you should escalate your complaint to the free, independent Financial Ombudsman Service. This is the official, impartial body for settling disputes between individuals and financial companies.
You need to fill in the ombudsman complaint form
As with the first letter to the payday lender, which you could always copy and paste, 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
It's simple to fill in, though take care. 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. In most successful mis-selling cases, this means a refund.
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