Reclaim payday & other short-term bad credit loans
Get £100s or £1,000s back for being mis-sold for FREE
Payday loans and other bad short-term credit loans have been widely mis-sold. While each product differ in how they work, they're all expensive, target people with poor credit and are often far too easy to get. If you couldn't afford to repay the loan, or the lender failed to check your finances properly, you may be able to reclaim £100s or even £1,000s.
1-min read to start your short-term bad credit loan reclaim
Making a complaint about a short-term bad credit loan, including payday loans, is easy – and it's totally free. We've a summary and quick links to our reclaim tool and template letter here if you pretty much know what you're doing. Alternatively, read the full guide below for detailed help.
1. How do I know if I can make a reclaim? Lenders must examine your finances to ensure you can afford the loan and fees. If, as was common, that wasn't done properly and you shouldn't have been lent the cash, or the costs or the repayment timetable weren't clear, you were mis-sold. See our checklist for lots more help.
2. You needn't pay a claims firm – use our FREE TOOL. Claims firms can take 25% + VAT off your claim, so instead use this quick link to see the tool (available via complaints site Resolver) lower down in this guide. Enter your details and it helps draft the complaint, sends it to the lender, keeps track and escalates to the ombudsman if you're rejected.
Or you can use our template letter to do it yourself for free by email/post.
3. Don't delay - you could get MUCH less if your lender goes into administration. Dozens of bad credit lenders have gone bust, including big name payday lenders such as Wonga and QuickQuid, leaving customers with legitimate claims getting significantly reduced payouts - or even finding it's too late to make a complaint. See what to do if your firm has gone bust.
4. Even if a lender DOESN'T go bust, you still might get less if you wait. High profile lenders, including doorstep lender Provident Home Credit, are seeking "schemes of arrangement" where they get special permission to pay mis-sold customers much less. See why you shouldn't delay your reclaim.
Payday loans have been widely mis-sold. Here's why you could make a reclaim
There are many different type of bad credit loans but payday loans saw a boom in popularity after the financial crash a decade ago - though they've hit a downward swing in the past few years. 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 back the amount you borrowed, plus the interest accrued.
The trouble is they're often far too easy to get. As a result, 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 their loans off, running up hideous amounts of interest.
The Financial Ombudsman Service (FOS) found in favour of more than 60% of complaints about payday loans in the latest quarter (January - March 2021), criticising the behaviour of those lenders as "unacceptable".
Following the demise of the UK's largest payday loan firm, Wonga (which went into administration back in 2018), MSE founder Martin Lewis said:
'Payday loans are for most a flawed concept'
"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."
Some inspiration... 'I received a payout of £6,106'
MoneySaver Joseph was inspired to reclaim from SIX payday loan companies after he heard about it on MSE, he emailed us to say:
I have been fighting six payday loan companies. And I'm proud to say, I won. I beat them ALL. I would like to personally thank Martin for raising this issue in the first place, and letting me know I could claim monies back from these terrible payday loan companies who lend people money irresponsibly.
After I took my case to the ombudsman I got £6,106. I'm gobsmacked at how much I have been able to claim back. This money has been used to clear every single debt I have over my head, and I am now debt-free completely.
After using MSE's free payday loan reclaim tool, MoneySaver Nat emailed in to say:
QuickQuid just kept allowing me to increase the amounts I borrowed, even though I started to accrue a string of debts with other payday lenders. It didn't seem to matter that I had these other financial commitments – they were happy to renew and increase the amount each time. It became a vicious cycle.
I used the Resolver tool. They didn't need to see any evidence, just my written account of how I felt they should not have lent to me in my financial situation and how it lead to a very anxious and stressful situation. Almost two months later, I received a payout of £4,172!
But payday loans aren't the only culprit - you can reclaim logbook, instalment, doorstep & rent-to-own loans too
Payday loans are not the only type of short-term high-cost loan you can apply for if you've bad credit. Just like payday loans these loans are often far too easy to get. But no matter what type of loan you have, your lender must check you can afford your repayments and treat you fairly. If not, you have the right to complain and possibly grounds for compensation.
Here we run through how they work and what you can expect to pay:
Logbook loans are loans secured on a vehicle - typically a car, but can be a truck, van, or motorbike - meaning the lender owns your vehicle until you've paid back the loan. You can keep on using your vehicle as long as you repay the loan. Typically you'll be able to borrow between £500 and even up to £50,000 - depending on the value of your vehicle.
Logbook loans are used in England, Wales and Northern Ireland. They are not available in Scotland – if you’re offered a loan there, it’s likely to be a hire-purchase or a conditional sale, so check carefully what is involved and how it works.
However, logbook loans are expensive - typical APRs are 200% - with some as high as 400%+, so this is a very expensive form of credit.
For example, if you borrowed £1,500 from Logbook loans 247 over 18 months, which has a rep APR of 277.57%, you'd pay back a total of £3,660. This means for every £100 you borrow, you pay back £244.
An instalment loan, also known as a "short-term loan" is similar to a payday loan, but has a key difference: with a payday loan, you are expected to repay your full loan plus interest in one lump sum, however with an instalment loan you are able to spread the cost of your loan with monthly or weekly equal instalments. Typically, you'll be able to borrow between £100 and £1,000.
These loans are very expensive with a representative APR of around 500%.
For example, if you borrowed £1,000 over six months from Satsuma loans - one of the biggest providers - you'd pay a rep APR of around 535% and £1,896 in total. In other words, you pay back £189.60 for every £100 borrowed. .
3. Doorstep loans - also known as "home credit" - is where someone comes to your home to collect your payment
Doorstep lending – also called home credit – is where a collector comes to your house to take your repayments. Like instalment loans, you won't pay back the loan as a lump sum, but rather, you'd make weekly repayments.
Similar to instalment loans, these loans are very expensive with representative APRs typically hovering around 550%. But usually these loans are for £600 or less.
For example, if you borrowed £300 from Loans at Home, a popular provider, you'd pay £19.50 every week for 26 weeks. Repaying a total of £507. So for every £100 you borrowed you'd need to pay back £169.
Rent to own is when you pay for household items, like cookers, televisions and freezers in instalments instead of paying the full cost up front. At the end of your term, depending on what you agreed, you might own the item outright, but you might not. Instead, you might be given the option to purchase (or upgrade) the item for an additional charge, or return the item.
While rent to own is still very expensive relative to cheap high street lending, a price cap introduced in 2019 on payable interest and charges is now limited to the cost of the product. So if the cost of an item is £89, the most you can be charged in addition to the cost of the product is a further £89.
For example, if you buy a fridge from a RTO company for £250, you will pay no more than £500 in total, including interest and other charges.
How do I check if I was mis-sold a payday loan or any other short-term bad credit loan?
Before lending to you - no matter whether it's a payday loan or other type of short-term bad credit loan, loan firms MUST check your finances to make sure you can afford it and also give you all the key information. If your lender hasn't followed these rules then you have grounds for a complaint.
This isn't a gesture of goodwill, it's part of the good practice customer charter and rules imposed by the Financial Conduct Authority, the body that regulates all financial firms in the UK.
The main reason you may have been mis-sold is because you should never have been lent the money in the first place.
For example, if you earn £400 a month and you're 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 it back.
As payouts can be worth £1,000s, it's worth checking if you were mis-sold.
You can put in a claim for compensation from both existing loans and loans you've already paid off, as long as you raise the case within six years of taking out the loan.
Here are the main mis-selling categories – as long as you fit one of these, you're likely to have a case:
- The lender didn't 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 didn't tell you how continuous payment authorities, or CPAs, work. They are often used by loan providers as a way to take recurring payments via a debit card, or sometimes a credit card.
- The lender didn't 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 your type loan should not be used for long-term borrowing or if you're in financial difficulty. There should have been adequate warnings about loan best practises.
- You weren't told by the lender what to do if you have a complaint. This means it was unclear to you how to deal with any issues you might have had with the loan.
- The lender didn't include a risk warning about late repayment in its advertising. This includes online advertising, or advertising that was sent to you by email or text message.
If you were treated unfairly, you could also be due redress
You can also complain for other reasons than just mis-selling. Once you have the loan, you're a customer of the loan firm and it has a duty to treat you fairly. If it doesn't do this, you could have grounds for a complaint and a reclaim. Even if your situation doesn't fit one of the reasons below, but you still feel like you were treated unfairly, you may still be able to make a successful reclaim:
- The lender didn't deal with you "sympathetically and positively". For example, if you were struggling to repay the loan.
- The lender didn't offer to freeze interest and charges if you were unable to make payments under a reasonable repayment plan.
- The lender didn't tell you about free and independent debt-counselling organisations. See where to get free advice in our Debt Help guide.
- The lender pressured you to extend the loan. Or didn't tell you about the risks of extending the loan, or make it clear exactly how much it would cost to extend the loan.
- The lender didn't sufficiently check your finances or personal situation to make sure you'd be in a position to pay back the extended loan. Here you can take such factors into account as your age, mental health, employment status, income, expenditure, proof of identity or financial history.
I think I was mis-sold a payday or short-term bad credit loan – how much can I get?
No matter what type of loan you had (or still have) - whether a payday loan, logbook loan or any other type of short-term bad credit loan - it's all about being put back to where you should have been if you'd been treated fairly or not mis-sold in the first place.
We've seen reclaims ranging from £10s to £1,000s over the years, but as a general rule, here's what you can expect (the same principles apply whether you were mis-sold or treated unfairly):
- You will likely be refunded interest PLUS any fees and charges from the time you were mis-sold or deemed to have been treated unfairly. The reason you'll get the interest plus any fees and charges back is because this is essentially the cost of the loan – a cost you’d never would have paid unless you’d not been mis-sold the loan in the first place.
If you make a successful mis-selling reclaim, you will likely be refunded MOST, if not all, the interest, fees and charges (if you were charged those) since the mis-selling happened when you first took out the loan. Since the interest makes up a considerable portion of the total amount you repay, these reclaims can be sizeable.
If you make a successful reclaim based on being treated unfairly, the amount of interest, fees and charges you get back will be from the time you were unfairly treated. Some customers will find they were treated unfairly from the outset, and will therefore get most of their interest, fees and charges back, but others might get proportionally less.
- You can claim interest on the total amount of your refund. On top of the refund, you can claim 8% interest per year on payments from the date they were paid to the date of settlement. This is basically interest on top of interest plus any fees and charges that might have been charged. Here's an 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.
- You can request for 'black marks' on your credit report to be removed. As well as a refund, you can ask for any poor payment records on loans deemed to be 'unaffordable' to be removed from your credit report. It's not done automatically, but if you use our reclaim tool, Resolver will prompt you to request this. The credit reference agencies take instruction from the lender, so it's up to the lender to request to remove them.
- For loans secured against an item or tied to a purchase - such as logbook loans and rent-to-own, you can expect a refund on the interest and charges and the following:
- For logbook loans, if the vehicle has been repossessed the firm would be asked to return it. If they are unable to do so (if the vehicle has been sold, for example), then you would be compensated for the value of the vehicle.
- For rent-to-own, returning the repossessed goods would not usually be in your best interest. The Financial Ombudsman has confirmed that returning any repossessed goods would usually require reinstating the agreements and it would only insist on this if it was in the customer’s best interest. In cases such as this, where the customer is in financial difficulties it usually isn’t.
- For logbook loans, if the vehicle has been repossessed the firm would be asked to return it. If they are unable to do so (if the vehicle has been sold, for example), then you would be compensated for the value of the vehicle.
It's important to understand that you WON'T get the original loan amount refunded. You will still have to pay it back, since you have already benefited from the loan itself. If you've missed payments or are still only partway through your loan, you may still be left with an outstanding balance, which you will be required to pay. Though in some extreme circumstances, the Financial Ombudsman Service (FOS) told us you could get the remainder of the loan written off.
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 FOS – see below.
You CAN sometimes get money back if your lender's gone bust... but DON'T leave complaining until then
It's still possible to make a mis-selling complaint after a firm has gone bust. However, leaving complaining until then will significantly reduce what you're likely to get back. So in short: DON'T wait to lodge a complaint. Do it now.
My company's gone into administration - how much will I get back?
How much you'll get all depends on how much money is leftover and how many creditors this has to be shared between. Unfortunately, customers of payday lenders are at the back of the queue of people owed, being counted as 'unsecured creditors'.
This means they're unlikely to see all the money they're due and could be waiting months. Wonga customers only got 4.3% of the compensation they were owed. So if you were due £1,000 in compensation, you'd have only got £43.
Even those who get their claims in just before a company goes bust may not get any more than those who filed theirs afterwards – it all depends on the administrator. So in short:
My lender's gone into administration - is the complaint process still the same?
If your lender goes into administration, you need to make a claim to the administrators. There is normally a simple form for you to complete, your lender's website should have the details. You may not get much back, but importantly if you win your complaint you can request any negative marks on your credit file to be removed.
Important: After the period of administration is over, the company will be "liquidated" and it will then be too late to make a complaint. It is now too late to make a complaint about these lenders: Wonga, Wageday Advance, the Money Shop, Payday UK, Payday Express.
What happens if my lender goes into administration while I'm still paying off my loan?
If your lender goes bust and you're paying back a loan, you're likely to have to continue paying until the administrator tells you otherwise. But you can still put in a complaint. In some cases, what you're owed for being mis-sold could be wiped from the ongoing loan. You could be due the interest and charges and interest on all of that too.
If your loan is with ANY of these payday lenders - you can make a reclaim
While many payday lenders have gone into administration, there are some that are still in business. Here are some of the main lenders, if you had a loan with any of them and believe you were mis-sold, start your reclaim today.
Lending Stream, Fernovo, Ferratum, Mr Lender, Moneyboat, Smart Pig, CashASAP, CashForUNow, Fast Loan Uk, LoanPig, Kabayan, MyKredit, Oakam, QuidMarket, Savvy, WageMe, Wizzcash.
Payday lender MyJar went bust last year. Here's what you need to know:
Payday loan provider MyJar went into administration in December 2020, becoming the latest in a long list of collapsed loan providers.
MSE has been in contact with the administrators to see what customers with active complaints and those who'd like to make future complaints might expect, and the firm is "hopeful" that potential claimants will be contacted by "early September".
All existing loan agreements remain in place and will not be affected by the administration. However, the firm is no longer able to issue new loans.
If you believe you were sold an unaffordable loan, you can still lodge a claim. Call 0120 300 62000 or email firstname.lastname@example.org.
Provident Financial, the parent company of Provident Home Credit, Greenwood Personal Credit - both doorstep lenders, and Satsuma Online Loans - an instalment lender, announced a cap on mis-selling payouts to its estimated four million past and present customers. This is called a "scheme of arrangement".
If you're a current or former Greenwood, Provident or Satsuma customer, here's what you need to know:
- You must have taken out the loan between 6 April 2007 and 17 December 2020 to be covered by the new redress scheme. This also includes being a guarantor for someone else's loan from Glo. Loans taken out before this date were subject to different regulations, so aren't part of the scheme. If you have a complaint about a loan issued after 17 December 2020, this falls outside of the scheme and will be dealt with under Provident's normal complaints policy.
- The loan must have been mis-sold at the point of issue. If you couldn't afford the loan over its term when you took it out, whether you're the borrower or guarantor, it was likely issued incorrectly – meaning you'd have a valid claim. Your claim will be assessed looking at a number of factors, including 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, whether you used one loan to pay off another and if you were behind on payments.
- You can submit a claim online. A dedicated online claims portal has been set up and you can now register to claim via the scheme's website. You won't need your loan details or paperwork, but you'll be asked to provide your scheme ID, which you should be able to find on top of any letters or emails you've been sent about it. If you don't have this, or need further help, you can email email@example.com or call its hotline on 0800 056 8936.
How to reclaim for FREE
If you think you were mis-sold or treated unfairly and you want to make a complaint, the process is quick, simple and (importantly) free. Just use our free online reclaim tool via complaints site Resolver or use our template letters - you can use either for payday loans or any other short-term bad credit loan.
If you complain to your lender via Resolver, it'll help escalate your case too. It will prompt you to contact the Financial Ombudsman Service (FOS) 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).
You don't need to use a claims management firm
Claims management firms may advertise as 'no win, no fee', but if you do secure a payout, some charge a huge fee – between 24% and 36% including VAT. Yet it's simple to reclaim yourself, for free.
Shockingly, 60% of people who went as far as the ombudsman to get compensation last year for mis-sold payday loans faced losing a hefty portion of their payout in fees to claims management firms.
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: Bad credit 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).
No response? Rejected? Escalate your case for FREE with the Financial Ombudsman Service
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 your 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 of interest, fees and charges you may have paid.
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