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If you have ever taken out a quick payday loan – or other short-term credit option – then you could be due compensation. A recent surge in the number of complaints against payday lenders has caused the Financial Conduct Authority (FCA) to step in an provide guidance for payday lenders – in no uncertain terms – when it comes to responding to these complaints. That guidance requires payday lenders to speed up responses to complaints – and make compensation payments. So, if you’re one of those who feel you have been mis-sold one of these expensive loans, you should be able to get your compensation quickly.
According to figures from the Financial Ombudsman, the number of complaints about payday loans has rocketed. In fact, in the year to March 2017 there was a 178% increase in complaints and a payday lender was the most complained about firm in the finance sector. Complaints against CashEuroNet, which owns Quick Quid and Pounds To Pocket, trebled in the first half of this year, making it the most prominent complained about company. Not only are complaints higher but the number of complaints being upheld has been increasing too. More than two thirds of complaints made to the Financial Ombudsman about payday lenders were upheld. 72% of complaints made against Wonga were upheld and 69% against Quick Quid. When compared to the number of complaints upheld against non-payday lender Barclays (28%) these figures are incredibly high.
The FCA has taken an uncompromising approach to the payday loans industry, insisting that compensation payments should be brought forward even if doing so threatens the lender with bankruptcy. In the light of Wonga’s collapse earlier this year, that’s a very real possibility for many payday lenders to consider. The main reason Wonga gave for its collapse was the significant increase in the number of mis-selling claims against it. While the lending giant blamed claims companies for its issues, the practices that caused the complaints were clearly problematic. In the light of this – and the ever-increasing number of complaints – the FCA has said that payday lenders must contact customers about potential compensation if the creditworthiness assessments that were carried out were not compliant. So, the FCA wants payday lenders to be proactive where there could be significant “detriment” to customers as a result of past lending practices. This could even involve contacting customers who have not yet complained.
According to the FCA, a payday loans lender must “make a creditworthiness assessment and the assessment should include the lender taking reasonable steps to assess the customer’s ability to meet repayments in a sustainable manner without the customer incurring financial difficulties or experiencing significant adverse consequences.”
Essentially, this means that the payday loan must have been assessed by the lender as affordable for the borrower. “Affordable” means that you can pay it off the following month as well as covering all your other outgoings at the same time. An indication that the loan was not affordable would be where the borrower made a late payment or was not able to cover the cost of repaying the loan as well as other outgoings, such as rent and bills.
A successful claim for compensation will mean all interest and charges on the payday loan get repaid, plus statutory interest of 8%. Any loans deemed unaffordable will also be removed from your credit history. If you believe that you have been treated unfairly by a payday lender and you want to make a claim then you should:
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read about Alex Hartley