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 differs 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.
If you're currently in financial hardship, see our Debt Problems guide for what to do and where to get help.
What is a payday loan?
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 in full, plus interest.
The trouble is payday, short-term, and bad credit loans are often far too easy to get. As a result, many borrowers have been stung by tricks used by loan firms, as well as their lending decisions, and have ended up struggling to pay their loans off, running up hideous amounts of interest, or borrowing more money to stay afloat.
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.
Over the past decade, payday loans have been widely mis-sold
Legally, lenders have to check that you can afford a loan before lending you the money, but it's been found that many high-interest loans (such as payday loans) were sold without rigorous-enough checks. And, many of those who found themselves struggling to pay back their loans weren't treated properly by lenders.
This isn't a small-scale issue: the Financial Ombudsman Service (FOS) found in favour of more than 60% of complaints about payday loans in January to March 2021, criticising the behaviour of those lenders as "unacceptable".
Follow our step-by-step guide to find out whether you've got an eligible complaint and, if so, how to make a reclaim.
Payday loans aren't 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.
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 ask for compensation.
If you have (or had) one of the following types of loans, head to step one to check whether you have a valid claim:
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Logbook loans. 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. Logbook loans are used in England, Wales and Northern Ireland. They are not available in Scotland.
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Instalment (or short term) loans. 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 instalments.
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Doorstep (or home credit) loans. 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.
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Rent to own. Rent to own is when you pay for household items in instalments instead of paying the full cost up front. Once you've paid off the loan, you might own the item outright, but you might not – depending on your agreement. Instead, you might be given the option to purchase (or upgrade) the item for an additional charge, or return the item. A price cap introduced in 2019 on payable interest and charges is now limited to the cost of the product. So if the item costs £89, the most you can be charged in addition to the cost of the product is a further £89.
Guarantor loans – where a nominated 'guarantor' is responsible for any payments the borrower is unable to make – have also been widely mis-sold.
We cover what both borrowers and guarantors need to look out for, along with specific reclaim advice in our full Reclaim mis-sold guarantor loans guide.
Those with logbook, instalment, doorstep & rent-to-own loans may be impacted too
Step 1. Had a payday loan? Check whether you can claim
We've two checklists for those who want to make a complaint: one for if you think you were mis-sold the loan, and one for if you if you feel like you've been treated unfairly by the lender.
Work through each, and if you think you fit into one – or more – of the categories head to step three to get your complaint started.
Important: It doesn't matter whether you have an ongoing loan or you've already paid it off, you can STILL make a reclaim, as long as you raise the case within six years of taking out the loan. However, if the lender you had the loan with has now gone bust, the process may be slightly different – head to my lender has gone bust for full information.
The mis-selling checklist
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.
If you fit one of these mis-selling categories, you likely have an eligible complaint:
The lender didn't properly check your finances or personal situation to make sure you'd be in a position to pay back the loan. This can be hard to know for sure. But if you're struggling to repay your loan or can't comfortably afford it, and you haven't had a significant change in circumstances since you took the loan out, you might fall into this category.
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. For example, the lender didn't tell you how continuous payment authorities (CPAs) work. CPAs 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 tell you that your type of loan should not be used for long-term borrowing or if you're in financial difficulty. You should also have been given adequate warnings about loan best practises in your loan agreement, or in the terms and conditions of the loan.
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.
The BIG sign you've been mis-sold is if you can't afford to repay the loan. But it's not the only reason...
If you were treated unfairly, you could also be due redress
Being mis-sold is not the only reason you can make a complaint. 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 compensation).
This second checklist covers common examples of 'unfair treatment' – however if your situation doesn't fit one of the reasons below, but you feel like you weren't treated properly, you may still be able to make a successful reclaim.
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The lender didn't deal with you "sympathetically and positively". For example, they didn't offer support or let you know the options available when you told them you were struggling to repay your loan.
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The lender didn't offer to freeze interest and charges if you were unable to make payments under a reasonable repayment plan. If you are genuinely struggling to repay your loan, your lender has a duty of care to help. This could include coming up with an alternative, affordable, payment plan with you, or offering to freeze interest on the loan.
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The lender didn't tell you about free and independent debt-counselling organisations. If you tell your lender that you're struggling to afford your repayments, they should sign post you to appropriate independent financial help.
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The lender pressured you to extend the loan. Or didn't tell you about the risks and costs of extending the loan.
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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. Similar to when you originally took out the loan, the lender has to undertake financial checks to ensure any extensions or 'top-ups' to your loan are affordable. While it can be hard to know for sure whether or not these checks took place, if you're struggling to pay and your circumstances haven't significantly changed, that's a sign the lender perhaps didn't do their due diligence.
Step 2: Check if your lender's in business (as this affects how much you'll get)
If you win your claim, the amount you'll get paid will be based on putting you back in the position you'd have been in had you been treated fairly, or not mis-sold, in the first place. This usually means you'll be entitled to a refund of any interest or fees you have paid.
However, the amount you'll actually get back depends on whether your lender is still in business or not.
Lender's still operating? Here's what you could get
It's important to understand that you WON'T get the original loan amount refunded. Because you already benefited from the loan itself, you won't get that amount back (and you'll have to keep making your repayments if you haven't paid the loan off fully yet).
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 these are a cost you never would have paid had you 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. 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 from your lender – the credit reference agencies take instruction from the lender, so it's up to the lender to request to remove any black marks.
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 will be asked to return it. If they're unable to do so (if the vehicle has been sold, for example), then you should be compensated for the value of the vehicle.
For rent-to-own, getting the repossessed goods back 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 where a customer is in financial difficulty, it usually isn’t.
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).
In some extreme circumstances, the FOS told us you could get the remainder of the loan written off.
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.
Lender's in administration? You'll likely get less
It's still possible to make a mis-selling complaint after a firm has gone bust. However, leaving your complaint until then will significantly reduce the amount of money you're likely to get back. So in short: DON'T wait to lodge a complaint. Do it now.
If your lender goes into administration, you need to make a claim to the administrators (rather than directly to the lender). There's normally a simple form for you to complete, and your lender's website should have the details. You may not get much back, however if you win your complaint you'll be able to request that any related negative marks on your credit file are removed, and if you're still paying back your loan, what you're owed for being mis-sold can sometimes be wiped from what you owe.
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'. 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.
For example, 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.
Doorstep lender Morses Club has announced that it is going into administration. This means it is now too late to make a claim.
However, if you submitted a complaint to Morses Club's scheme of arrangement, it will still be reviewed, and you will receive a share of the 'Early Termination Fund'. Morses Club predict that there will not be enough money in this fund to pay back the full amount each claimant is owed. We will update this page when we hear more.
Important: If you still have a loan with Morses Club, continue making your payments as normal until you are contacted with more information.
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 back too.
What happens if my lender goes into administration while I'm still paying off my loan?
Lender's in liquidation? You can't claim anymore
After the period of administration is over, the company will be "liquidated" and it will then be too late to make a complaint.
You can now no longer complain to any of these lenders: Wonga, Wageday Advance, the Money Shop, Payday UK, Payday Express, QuickQuid, Provident, Satsuma, Glo, Greenwood, Loans at Home and Pounds to Pocket.
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!
Some inspiration... 'I received a payout of £6,106'
Step 3. Start the complaint process
If you've gone through the lists above and think you fall into either (or both) of the 'mis-sold' or 'treated unfairly' categories, the complaints 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 the tool 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, 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 receiving a rejection or final offer letter).
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.
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.
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.
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.
At this stage, reclaiming's like a game of 'who blinks first?' Your payday lender may say "no". But if that happens, don't worry. You can take your case to the FREE ombudsman (see below).
Lender in administration? You'll need to complain direct
If your lender has announced that it's 'in administration' you won't be able to use the Resolver tool – you'll need to make a claim to the administrators. There's normally a simple form for you to complete, and your lender's website should have the details. You may not get much back, but importantly if you win your complaint you'll be able to request that any negative marks on your credit file are removed.
In some cases, lenders in administration will try and set up a 'scheme of arrangement' which is approved by x, and creates a pot of money to be split between all those with an eligible claim. In these cases the lender will set up a 'scheme portal' (usually an online form) which you can use to submit your complaint within a set amount of time. Once this time period has elapsed that 'portal' will close, and you'll no longer be able to complain.
Step 4. 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, your complaint's rejected, or you're not happy with the response, you can escalate your claim to the free, independent Financial Ombudsman Service. This is the official, impartial body for settling disputes between individuals and financial companies.
To begin your complaint, you'll need to fill in the ombudsman complaint form.
As with the first letter to your lender (which you could always copy and paste into the form) 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.
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.
You can't use the FOS if your lender has a scheme of arrangement in place, but you can appeal
If you make your claim as part of a scheme of arrangement, the Financial Ombudsman service won't be able to get involved if you're not happy with your lender's decision. However, if you think you've been treated unfairly, or that the wrong decision has been made you CAN appeal, and your complaint will be looked at by an independent third party.
How you appeal will vary by lender, but you should be able to find the information on the relevant scheme website, or in correspondence you've received about your complaint.
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