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Reclaim payday loans for free

Get £100s or £1,000s back for being mis-sold without using a claims firm

payday loan refunds
Amy Roberts
Amy Roberts | Edited by Gary Caffell
Updated 30 June 2020

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 – but hurry, you should go quickly. Some customers have come away with just a fraction of what they were owed because they left complaining until after their payday lender went into administration. 

In this guide

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.

We don't like payday loans. But if you're considering getting one, read our Payday Loans 'Best Buys' guide. If you're currently in financial hardship, see our Debt Problems guide for what to do and where to get help.

How do I check if I was mis-sold? 

Before lending to you, payday loan firms – as part of the good practice customer charter and rules imposed by the Financial Conduct Authority – 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'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.

The Financial Ombudsman Service (FOS) found in favour of more than 70% of complaints about payday loans in 2019/20, criticising the behaviour of those lenders as "unacceptable".

As payouts can be worth £1,000s, it's worth checking if you were mis-sold.

The mis-selling checklist

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:

  • Mis-selling checklist

    • 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.

You CAN 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 payday loan firm has gone bust, however, leaving complaining until then will significantly reduce what you're likely to 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 (such as Wonga customers who will only get 4.3% of the compensation they're owed).

Even those people 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 and the circumstances. 

So, if you do believe you were mis-sold a payday loan by a company that is still active, don't wait to lodge a complaint. Do it now. Time really is of the essence in this situation.

Payday lenders aren't covered by the Financial Services Compensation Scheme, the consumers' safety net for when most finance firms fail. So when they go bust, the size of the payouts is down to how much money the administrators can squeeze out of the business and how many creditors are lining up.  

In terms of speed, you won't necessarily be better off using a claims management company. 

If your payday lender goes bust and you're paying back a loan, you're likely to have to continue paying until the administrator tells you otherwise. 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.

Sunny now in administration. If you've had a loan, act now

Payday loan provider Sunny went into administration at the end of June, becoming the latest in a long list of collapsed loan providers – payday loan giant Wonga folded in 2018, followed by providers such as QuickQuid, 247Moneybox, PiggyBank and WageDay Advance.

KPMG has been appointed as administrators of Elevate Credit International Limited (ECIL), which offered loans under the Sunny brand (previously known as 1 Month Loan and Quid).

Sunny had around 50,000 customers on its loan books. KPMG says that they will still need to carry on repaying their loans in the usual way.

If you believe you were sold an unaffordable loan, you should lodge a claim as soon as possible. Sunny customers should call 0800 7315 444 or send their claim via email to help@sunny.co.uk.

If you'd already made a complaint before Sunny collapsed, it will be passed on to the administrators. KPMG says you'll be contacted in future if there are any further steps to progress your claim, but you don't need to do anything at the moment.

Any claims will be treated as 'unsecured creditor claims', including if you'd had an offer of redress and hadn't yet been paid. Unfortunately, this means you'll likely be in a long queue of other claimants, and will be unlikely to receive the full amount of your claim. In the past, customers who were mis-sold payday loans by lenders which later collapsed have received just a fraction of the compensation they were owed.

  • Wonga complaints deadline has now passed – mis-sold customers to get just 4.3% of claims

    Those who wanted to complain about a payday loan taken out with Wonga had to do so by 30 September 2019.

    It has now been confirmed by the firm's administrators that those who were mis-sold payday loans from Wonga before it collapsed will receive just 4.3% of the compensation they're owed. So for example if you were owed £100, you'll get less than a fiver back. If you are eligible for compensation this will be paid by bank transfer or cheque. For the full update see the MSE News story.

    If your initial claim was unsuccessful, you can escalate your complaint within Grant Thornton's complaints department, but you can't complain to the ombudsman, as payday loan firms that are in administration fall outside its remit. 

    If you've got questions about an existing claim, you should contact Wonga's customer care team.

  • How's my Wonga claim going to be assessed?

    Grant Thornton has developed a tool to assess your claim automatically, speeding up the process. Your claim will be based on several criteria, including:

    • The size of your loan in relation to your reported income.
    • How long you held the loan and how many loans you have had, to see if you repeatedly borrowed without a significant break.
    • Other indicators of affordability, eg, being in arrears.

    Grant Thornton says it will follow the way the Financial Ombudsman Service (FOS) treats payday loan claims as closely as it can, while balancing its duty as administrator to return as much money to other creditors as possible.

    If you disagree with the outcome, your claim will only be put forward for a manual assessment if you can come up with new evidence about being mis-sold unaffordable finance.

I think I was mis-sold – how much can I get?

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.

  • What about my credit record?

    As well as a refund, you can request that any poor payment records on loans deemed to be 'unaffordable' are removed from your credit report. It's not done automatically, but if you use our reclaim tool, Resolver will prompt you to request that bad marks are removed.

    As the lender itself has to remove the information on your credit report(s) (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 your credit report to be updated.

     

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 wrote to 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!

  • And here are a few other successes from our forum

    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.

    Forumite Rossim1985

    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.

    Forumite FinallyGettingFree

How to reclaim for free – but be quick

If you think you've been mis-sold a payday loan, hurry up with making a claim by using our free online reclaim tool via complaints site Resolver. The risk is that if your lender goes bust – as many have – you may get little back, so get in quick in case that happens. 

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 (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). 

Since its launch, tens of thousands of MoneySavers have used our free tool and are reporting back individual payouts averaging £348 from 20 payday lenders. If you think you were mis-sold, start your claim now. 

Important: Rather than use the tool, QuickQuid customers should call 0800 016 3114, while On Stride customers should call 0800 210 0923. This is because parent company CashEuroNet, owner of both payday lenders, went into administration in October.

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, two-thirds of people who went as far as the ombudsman to get compensation in the year to 31 March 2019 for mis-sold payday loans faced losing a hefty portion of their payout in fees to claims management firms.

Among nearly 40,000 claimants who turned to the ombudsman in 2018/19 having first asked for a refund from their payday lenders, nearly 27,000 stood to miss out, often on £100s, when they could have claimed easily for free using our tool or template letter.

Don't want to use Resolver? Use our free template letter to do it yourself

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.

  • Template letter to payday loan lender...

    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). 

  • No response? Rejected? Escalate to the FREE ombudsman

    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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