A reader asked: I took out countless pay day loans for example with Lending Stream, Quick Quid, MyJar, and Wageday Advance a few years ago. Suddenly they have all come out of the woodwork. I now have a court claim arrive from MotorMile Finance – for a Lending Stream account. I have applied to extend the date for defence but am not sure what to put in my defence. There are three other accounts outstanding and I’m guessing once they’ve claimed one they will apply for the others.
Payday lenders don’t often take a customer to court themselves, they tend to sell the debt on to a debt collector such as MotorMile Finance (MMF). The general approach to these cases is much the same for all lenders and all debt collectors.
The extra complications with payday loans
My previous article, What to do if you get a Claim Form, has looked at the forms and court process for debts in general. Read that now as an overview if you haven’t dealt with a Claim Form / CCJ before. Make sure you acknowledge the service of the form so you get an extra 14 days to put in your defence.
The procedures for payday loans are the the same as for other debts but there are two extra reasons why you may want to defend one of these claims, even if you agree you owe the money:
- you may have an affordability complaint about this loan and other payday loans you had from the same lender that you want to be decided by the Financial Ombudsman;
- you may want to use an unfair relationship defence.
For a loan to be affordable, you have to be able to make the repayment without undue difficulty – basically without borrowing more the next month because you had repaid this loan. So if you were regularly rolling over / deferring payday loans, or repaying one only to borrow again a few days later, your loans probably weren’t affordable. The lender should have spotted you were probably in difficulty and stopped lending. See How to ask for a payday loan refund for details about how to make a payday loan affordability complaint.
If you don’t already have a payday loan complaint in with the lender, you should put one in right away if you think the loans were unaffordable.
You should inform the debt collector of your complaint and ask them to halt the court process whilst your complaint is heard. If your complaint is upheld, the balance that you owe to the debt collector may be reduced or wiped out. It is better to have your whole case heard by the Ombudsman rather than loans looked at individually in a County Court. The Financial Ombudsman service is provided as a customer-friendly, cheap alternative to going to court – that is what it is there for. If you get a CCJ for this debt the Ombudsman will not consider it as part of your complaint.
Remind the debt collector of FCA rule CONC 7.14.1: (1) A firm must suspend any steps it takes or its agent takes in the recovery of a debt from a customer where the customer disputes the debt on valid grounds or what may be valid grounds.
If the debt collector agrees, you need to confirm with the court that the case has been stayed. Do this before your time to file a defence has run out! If the debt collector doesn’t agree, then you need to ask the court to stay the proceedings. For how to do this, see Getting some legal help below.
(For any debt advisers reading this, there has been a recent case (Templars Estates Ltd and others v National Westminster Bank Plc and Royal Bank of Scotland, 2016) where the defendant agreed to accept a FOS decision as binding as an alternative to proceeding with a court case. This was discussed in the Citizens Advice EAT September 2016 newsletter).
Ideally your court case will be halted whilst your complaint is resolved by the lender or at the Financial Ombudsman.
If it isn’t, you can defend the case on the basis that there is an Unfair Relationship between you and the lender. The Consumer Credit Act 2006 enables a borrower to challenge a credit agreement in court on the grounds that the relationship between the lender and the borrower is unfair to the borrower. Irresponsible lending is specified as an example of an unfair business practice, see OFT updated guidance on unfair relationships for details. So it could be argued that a payday lender failed to make adequate affordability checks before the later loans where there was evidence from the borrowing history that the borrower was dependent on the loans.
You will probably need some help to file a defence based on this. These cases are unusual and no one has a lot of experience with them.
Getting some legal help
You need advice rapidly – be careful of the timescales to get your defence in. It’s not just a case of “what do I write on the defence form”. You may have a lot of subsequent questions, such as “what do I do as the solicitors haven’t replied“, “should I accept this allocation to track“, “how to I apply for the case to be stayed” etc.
I am not a solicitor and I can’t help you with how to handle your case. Good places to support you are:
- National Debtline 0808 808 4000;
- a local Law Centre;
- your local Citizens Advice. They can get help from the Expert Advice team nationally for complicated cases such as an unfair relationship defence;
- for help on the internet, the Legal Beagles “Received a Court Claim” forum is good.