Claims management firms have made a lot of money from PPI reclaims – now they are hoping to do the same for refunds from payday lenders. If you have been cold-called by one of these firms, or you have come across one of their websites, you might be thinking of signing up with them… here are four good reasons not to!
1) Save a lot of money
These firms often charge 30%, 40% or more of any money you are awarded, plus VAT. That can be a lot! the regulator is talking about a price cap, of “only” 25%, but there are no timescales for this and it won’t apply to any claims started now.
Of course if this was the best way to be sure of getting a refund, then it may be worth paying their high fees. But read my How to ask for a payday loan refund page which describes how you can do this yourself and has template letters to help you.
The Ombudsman has been saying for years that it approves more PPI complaints from individuals than from claims firms.
2) They aren’t experts in this sort of refund
The Claims firms websites say things like “we have helped thousands of customers like you” and “we have a proven track record of reclaiming”. They may have nice testimonials from Mrs W who got back £8,000 from Lloyds, and Mr T who received £3,000 from HBOS… they don’t sound like payday lenders, do they?
These firms aren’t experts in payday loan reclaims – no-one is! They have a lot of experience with PPI reclaims, which are simple: ask a couple of questions and with the answers it’s usually easy to make out a case for PPI mis-selling.
But the approach with payday loans should be different, especially if you repaid the loan on time, or borrowed from more than one lender. It’s actually not hard to show that you couldn’t have repaid the loan and met all your normal living expenses – that makes the loan “unaffordable” and so it should never have been given. But everyone’s payday loan case is different, it’s not like PPI reclaims at all.
3) They make it sound too simple
My page may sound more complicated than the short form a claims firm wants you to fill in. But no claims firm is going to be able to do a good job without this information. If they aren’t asking what your income and expenses are, how they can make a good argument that you couldn’t afford the payday loans you were given? The simple PPI approach isn’t going to work well with payday loans and if it is used, your claim which has a lot of merit may be rejected!
Claims management firms websites also never seem to mention potential problems:
- sometimes you aren’t going to get a refund even if you have a great case. The lender may be based abroad and not regulated by the FCA – in that case you won’t be able to take your case to the Financial Ombudsman;
- sometimes the money won’t be paid to you, if you have gone bankrupt or are in an IVA. And if you are in a Debt Relief Order, you shouldn’t try to reclaim any money otherwise your DRO may be revoked;
- what about getting the loans removed from your credit record? That’s an important point for many people with payday loan problems.
4) The Ombudsman is very easy to deal with
Sometimes people think going to the Financial Ombudsman is very difficult and they will need help with it. I’ve been saying for a while that their helpline is very friendly to people who want to put in a complaint. Several of the people commenting on the How to ask for a refund article are confirming this, for example Sam says:
“I’ve found them brilliant to deal with, my case officer is really nice, he cannot do enough, I’m pleasantly surprised & very impressed!”
Conclusion – you can do a better job yourself!
So do you trust someone that cold-called you, that has a website that ignores the difficult bits and is saying they are an expert when they aren’t?
Not only will you save money by making the claim yourself, you will probably do a better job of it, because you know how you got trapped into repeated payday loan borrowings.
It needs an individual letter to make the case that you should have a refund and you are the best person to write it – with some help from the Debt Camel templates!