Reclaim payday loans for free
Get £100s or £1,000s back for being mis-sold 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 – 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.
1-min read to start your payday loan reclaim
Making a complaint about a mis-sold payday loan 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. What counts as mis-selling? 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 the full mis-selling 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.
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.
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.
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 – 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 payday 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 a payday loan should not be used for long-term borrowing or if you're in financial difficulty.
- You weren't told by the lender what to do if you have a complaint.
- 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 (eg, the lender failed to put you on a special payment plan if you were struggling), you could also be due redress
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 these reasons, 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".
- 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.
- The lender pressurised 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.
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 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 only got 4.3% of the compensation they were 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.
MyJar went into administration on 22 December 2020. If you've had a loan, here's what to do
Payday loan provider MyJar went into administration on 22 December 2020, becoming the latest in a long list of collapsed loan providers.
Paul Boyle and Anthony Murphy of Harrisons Business Recovery & Insolvency (London) has been appointed as joint administrators. MSE has contacted Harrisons to see what customers with active complaints might expect.
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 should lodge a claim as soon as possible. Call 0120 300 62000 or send their claim via email to firstname.lastname@example.org.
Payday lender Wonga fell into administration in 2018, and the deadline to submit a complaint about a mis-sold Wonga loan was September 2019. Unfortunately, even if your claim was on time AND successful, you'll have only received 4.3% of the compensation you were owed – for example, if you were owed £100, you'd have got less than a fiver back.
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.
My claim hasn't been dealt with yet – how will it be assessed?
Grant Thornton (the administrator for Wonga) has developed a tool to assess your claim automatically, speeding up the process. Remember, claims had to be submitted by 30 September 2019. 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 will be refunded interest PLUS any fees and charges. If you make a successful reclaim, you will likely be refunded the interest, fees and charges (if you were charged those). Since the interest makes up a considerable portion of the total amount you repay, these reclaims can be sizeable.
- You won't get the original loan amount refunded. You will still have to pay the original loan amount 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.
- 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. 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.
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.
Need to know: 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 FOS – see below.
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!
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.
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.
Our free online tool helps draft a letter (which you can alter before sending), sends it, tells you when you've a response, keeps track of your complaint and escalates it if necessary.
We do this using the complaints firm Resolver, which provides the technology, but the underlying template letters and logic behind it are ours. We're working with Resolver on many projects to combine our expertise on how to complain with its cutting-edge technology.
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 2019.
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.
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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