On 8 September, the latest Claims Management Regulation Bulletin, CMR35, from the Ministry of Justice warned about many problems with payday loan refund claims.
But according to many reports, Wonga went bust in August 2018 because of the number of affordability complaints they were getting from Claims Management Companies (CMCs).
So does using a claims company make it easier to get a payday loan refund? Is this worth paying their expensive fees for?
The answer turns out to be using a claims company may be slower, give you poorer advice and may get a lower refund than making a complaint yourself. And they are certainly very expensive!
“But I don’t know if I have got a good complaint”
Many of their websites say things like:
- our online validation system will determine if you have been mis-sold loans;
- get a free review of your complaint;
- our team will find out if you are due a big refund.
When you tell them the names of your lenders, they usually say Yes you should complain. Even if you put in the name of a lender you didn’t use!
There is no way they can tell if you have a good complaint without asking you for loads of details and then someone thinking about them. But that would mean work for them, so they don’t bother and just say you have a good claim. Basically lying to you.
And if you can’t remember who you borrowed from, they can’t help you.
“I don’t know what to put in a complaint”
Most people want some help with what to say – an affordability complaint sounds complicated and you don’t want to get it wrong and miss out on a refund.
That’s why I give templates for payday loan refunds. And a list of payday lender email addresses to send the complaints to – easy and quick for you.
My templates ask you to say a bit about your finances and what happened with your payday loans.
A typical claims company’s template doesn’t. It amounts to Mr X wants a refund of the interest he paid because the loans from you were unaffordable. It says nothing useful about your complaint! Some claims firms ask you to send them bank statements, credit records and loan statements. But they don’t use this information in the complaint email.
Here is what the regulator says in CMR35:
Failing to conduct a thorough assessment of a client’s financial situation during the period of lending being complained about may mean CMCs are unable to represent their clients effectively…
It may help resolve complaints more quickly if CMCs are able to provide this at the point of submitting a complaint.
Sending these identical complaints may make your complaint much slower if the lender rejects it and it has to go to the Ombudsman.
“I think I need help to do this, not just with the first email”
Some common questions include;
- should you carry on making payments if you still owe some money to a lender?
- can you win a complaint if you always paid the loans on time?
- is it OK to claim if you were in debt management or an IVA?
- does it matter if your loan application wasn’t accurate or you had a gambling problem?
- should you tell a debt collector about your complaint?
If you have one of these questions – or any of a dozen more – you would hope to get some support and advice from a claims company. But look at their websites, they don’t mention these sort of very common situations at all.
In contrast, if you leave a comment here on Debt Camel, you may get told what specific article to read that covers your situation, you can hear what other people have done and how well that worked for them.
For example, someone yesterday asked a question and was told: “My partner had a similar response and like you, we were reluctant to…”
It’s reassuring to hear that you aren’t the only one facing an issue, that other people have managed to get bank statements from closed bank accounts etc. Getting this sort of feedback helps you feel in control of your complaint.
“How do I know whether to send a case to the Ombudsman”
This is one of the hardest decisions you may have to make – one where you would really like good advice from an expert. But you aren’t likely to get it from a claims company!
Many claims firms seem to follow a blanket policy of sending every case to the Ombudsman that a lender has rejected. CMR35 says:
We are receiving reports and evidence that suggest that some CMCs are routinely or automatically referring complaints rejected by the financial business to the Financial Ombudsman Service without first considering the reasons for the rejection. Additionally, it appears that some CMCs are not advising clients of the prospects of the complaint being upheld by the Financial Ombudsman Service, before seeking instructions from the client about how to proceed.
But this is pointless, most one and two loan cases are rejected by the Ombudsman, it is unusual for one to be upheld. Your claims firm should tell you this and whether your case is likely to be one of the unusual ones. Too often this isn’t happening.
Sometimes there is the opposite problem. If a lender has made an offer, you may be advised to accept it, even if it’s pretty bad. A claims company may be happy to pocket £35 of a £100 goodwill offer – just for sending an email, that is a pretty good result for them. But for you it matters if you could have got five or ten times as much by going to the Ombudsman.
One person reported getting a text telling them about an offer when he was on holiday – he told the claims firm he would look at it when he got home. But the claims company didn’t wait and just accepted the offer. He couldn’t challenge this, buried in the small print was a clause allowing the claims company to use its discretion.
“I wouldn’t know what to say to the Ombudsman”
The Ombudsman doesn’t want a legal argument, they want to know what happened to you.
To win a payday loan refund at the Ombudsman you will need to provide a copy of your credit report and bank statements. If you use a claims firm, you still have to do this.
The adjudicator at the Ombudsman may come back with questions. Usually these are easy for you to answer, but all a claims company can do is forward you the question… they don’t know that the transfers to X on your bank statement are because X was your partner and they were paying the rent and council tax for example.
So you still have to do all the work, a claims firm doesn’t do anything useful, it just gets in the way.
The Ombusdman has given an example (this is in an unusually long decision as the Ombudsman chose this case to illustrate a lot of points in detail. Decisions are usually only a few pages with much less legalese!) of how Claims Firms provide inaccurate and unhelpful information:
Miss H’s representative has compiled its own breakdown of Miss H’s income and expenditure. But I don’t think that this paints an accurate picture of Miss H’s financial situation. It appears to include her weekly benefits income alongside items of expenditure which look like they are monthly (for example it has included an outgoing of £96 for council tax and £40 for phone and internet). And I think any affordability calculation made on this basis could prove misleading… I can’t place much weight on the submissions made by Miss H’s representative.
So no, it’s not easier to use a claims firm!
These companies charge incredibly high fees – 25%, 35% or more of your refund. For this it’s likely that they:
- will lie to you about whether you have a good claim, because they don’t check;
- send in a short, poor email complaint that is less likely to get you a refund directly from a lender;
- may tell you to accept a poor offer;
- may send your case to the ombudsman even though they know it is hopeless;
- get in the way, slowing down communications if the lender or (more likely) the Ombudsman needs to ask you a question.
You are the best person to explain your complaint. You know what happened to you.
With some help from the Debt Camel templates you will do a better job than a claim firm ever can! And you will have the support of hundreds of other people also asking for refunds.
No win No fee … but you can end up owing the claims company money
You may think a No win, no fee guarantee means you can’t lose. But you can. if the refund doesn’t get paid to you. This can happen if you still lowe money on the last loan… here any refund you get will be used to pay off the balance first. If you still owe a lot, that may mean you never get any cash back, but you still owe the Claims Company their high fee.
Here is a complaint against Wageday Advance where that was the result.
This doesn’t apply to Debt Hacker – it’s not a claims company!
In autumn 2018 Debt Hacker launched. This is not a claims company – it is a campaigning group that provides helps people submit payday loan refund claims. If you tell it which lenders you used and what problems you had with each of them it will generate and send a complaint email from you to the lender.
- it doesn’t charge you any fees at all;
- it won’t take decisions on behalf (so it can’t take the wrong ones!);
- it doesn’t get in the way and slow things down by making all communications go through it.
So there is nothing wrong with using Debt Hacker rather than the template letters here. If you do use them, you can come and ask for support here by asking questions in comments on the main payday loan refund page.
Look at the comments below for some readers’ experiences with claims companies.