Contents
Background to the Sunny administration
Sunny went into administration on 29 June 2020. It was one of the largest UK payday lenders. It joined a long list of lenders who have collapsed in the last nine months: QuickQuid, Moneybox 247, Swift Sterling, Piggybank, Nextcredit, Peachy, Uncle Buck.
Sunny’s payday lending model was unusual, often lending very small amounts but very frequently, allowing customers to have several loans open at a time.
Sunny’s US parent had previously been hopeful
Elevate Credit International Limited is the UK subsidiary of the US subprime lender Elevate Credit, Inc.
In May 2020, Elevate Credit, Inc, said its net income from the UK had decreased by $6 million from the previous year, resulting in a net loss for the quarter. It attributed this loss to:
a shrinking loan portfolio, along with a steady stream of affordability complaint expense.
Sunny had made just 10,000 new customer loans in Q1 2020, down from 30,000 in Q1 2019. This was attributed to:
the ever stringent customer affordability regulations in the UK.
But at that time the US parent said:
we remain hopeful that we can work with the UK regulators during the second quarter of 2020 to come to an understanding on how we can begin growing the UK business again, as our UK unit economics are very good.
Sunny losing 76% of cases at the Financial Ombudsman
In the payday loan trap, repaying a loan leaves the borrower so short they have to take out another one. And another one. And another one.
The FCA says that a lender has to make reasonable checks that a loan it gives is “affordable” – that the borrower can repay the loan without having to borrow more money or fall behind with other bills and debts.
Since 2015 an increasing number of borrowers have complained that Sunny and other payday lenders have given them unaffordable loans.
The Financial Ombudsman (FOS) has set out what it looks for in a case about unaffordable lending. If the first loan was small a lender doesn’t have to do a lot of checks on affordability. But when a borrower keeps applying for more loans, that is a sign that the loans aren’t affordable, even if they are repaid on time.
In the last half of 2019, FOS received nearly 3,000 complaints about Sunny. During that six months, FOS agreed with the customer in 76% of Sunny cases. This is more than twice as high as the average uphold rate across all FOS cases, which was just 35% for that period.
Sunny wasn’t learning from FOS decisions
The FCA’s DISP rules say that a lender should learn from FOS decisions and adopt that approach in how it responds to complaints. But there is no sign of Sunny doing this.
Here are some examples of poor offers or rejections from Sunny on cases that sound very strong:
- 49 loans with them over 3 years continuously, they only offered me a refund on 37-49 (£2,100).
- I had 30 loans from them between 2017-2019. As a goodwill gesture they’ve offered to write off my remaining balance of around £70.
- The complaint has been rejected. I thought I had a strong case, I carried out 70 loans with no breaks in borrowing. Paying back a total of over £30,000.
And at FOS, Sunny seems to be rejecting far more adjudicator decisions and forcing the case to go to an ombudsman than is reasonable.
Taken to court
Sunny has the dubious distinction of being the only payday lender taken to court in an “unfair relationship” case by a claims firm.
The case was held in March 2020. They may well have known from the way the hearing went in March that they weren’t going to win and this may have contributed to their decision to go into administration before the judgment was published. When Sunny went into administration in June 2020, that would normally have been the end of the case, but the judge agreed to give a judgment saying:
the discussion of these sample claims may be of assistance to other parties to similar litigation.
Sunny lost the case, badly. See Kerrigan v Elevate Credit for my thoughts on the court case.
500,000 customers were mis-sold loans
KPMG, the Administrators, developed a Claims Calculator to work out which Sunny loans were likely to have been “unaffordable”.
On 4 November 2020, they emailed more than 500,000 Sunny customers who this calculator shows were mis-sold loans.
Sunny had about 700,000 customers, so for 500,000 of them to have been mis-sold loans is a shockingly large number.
By contrast, the Wonga administrators only had to pay out to about 400,000 customers. (Although that was because not all Wonga customers put in a claim. The Sunny administrators assessed all customers. So we know that half a million figure is right.)
The Administrators warned there may not be enough money to distribute if too many people make claims. Even less than the Wonga customers received.
People had to put in a claim to get a pay-out. But their credit records were automatically being cleaned, see below.
The administrators originally said people may get less than 1p in the £
The Administrators warned there was very little money to distribute – they call this “a dividend”. If too many people claimed, there may be nothing:
If a very high volume of claims and queries is received, it is likely that the operating costs of responding to queries and processing and adjudicating claims will become so high that no funds will be available for a dividend to be paid to creditors.
If a lower volume of claims and queries is received and a dividend can be made, the dividend is likely to be a very low percentage of your claim… we estimate that any dividend payable could be less than 1p in the £ and that any payment would likely be made in Spring 2021.
Now paying 3.21%
On 28 May 2021, the KPMG administrators announced they will be paying 3.21p in the pound to c 40,000 people who submitted a claim for unaffordable loans.
All 500,000 customers with mis-sold loans should have had their credit records repaired, see below.
40,000 people is a low number as the administrators calculated that more than half a million were mis-sold loans. Many people may not have bothered to claim as the administrators had warned the amount could be less than 1p in the £.
You will get an email saying how much you will receive.
Payment details:
– most people will be paid by electronic transfer, likely to arrive in people’s bank accounts on 3 June 2021
– the payment reference will be “Elevate Sunny”
– a small number of customers who had not provided up-to-date bank details will be paid by cheque.
If your last loan was sold to SLL
If your last Sunny loan was sold to SLL, you will not be getting any “set off” in the administration.
But you can complain to SLL and ask for set off, see No set off in a Scheme/Administration when debt had been sold? for details.
Your credit record should have been cleaned
The only good news here is that the Administrators decided to automatically clean up your credit record if they decided you had unaffordable loans:
- for the first five of the loans that have been decided to be unaffordable they will remove any defaults or missed payment markers;
- all unaffordable loans after the first five will be deleted from your credit record.
This is trying to follow what the Financial Ombudsman typically did in Sunny cases where there were a lot of loans.
The credit record updates and deletions should have been done automatically by the administrators by the end of November 2020.
If there is any chance you may want to make an affordability claim in future about anything – credit card, overdrafts etc not just high cost loans – then I suggest you immediately take a copy of your credit records while they still show the Sunny loans.
But what if your credit record still isn’t right?
In January 2021 people were still saying their credit records weren’t correct. Some people had loans deleted then added back again.
Experian seems to be sorting things out but not Equifax or TransUnion. But you need to check all three CRAs to be sure what has happened to your data.
If you think Sunny hasn’t corrected yours properly then it’s no use asking the administrators. They say:
We have transferred the control of maintaining any remaining records to the credit rating agencies, as we will not be maintaining these records going forward. Any further queries regarding entries on customers’ credit files in relation to ECIL loans should be raised with the relevant agency directly.
So many people have been asking how to do this that I have written a separate article on it: How to correct your credit record if the lender has gone under.
Still not paid by end July?
If you still haven’t been paid, you should email CustomerServicesEAS@Insolvency.gov.uk. Attach the email from the Elevate administrators saying what you should be paid. Attach your bank statements for June and July (wait until the end of July so you can attach a statement for the whole month) which show you did not receive a payment,
“Ripped off by Sunny, now let down by the regulators”
Many people will feel horrified when they see all the loans that have been assessed as unaffordable and the large amount of interest they paid on those loans.
It isn’t the Administrators fault the refunds will be so low, they are just dividing up what money there is.
It is the Financial Conduct Authority’s (FCA) fault:
- despite the rules about checking affordability, Sunny was allowed to carry on lending;
- the FCA didn’t insist Sunny had enough capital to pay out compensation claims; and
- the FCA hasn’t provided any back-up scheme to pay the compensation. If a PPI firm went bust, you would still have received a PPI refund in full from the FSCS scheme – but that doesn’t apply to payday loans.