NSF has written to all affected customers.
Everyday Lending Ltd has three brands: Everyday Loans (lending from its high street shops) and George Banco and Trust Two (two guarantor lenders). All customers with loans that started before 31 March 2021 have to make a claim to the Scheme before 31 December 2023.
Claims after this date will not be accepted for loans taken before 31 March 2021.
What is “a Scheme of Arrangement”?
What is the purpose of a Scheme?
A Scheme is a formal legal arrangement that allows a firm to change the rights of some or all of its creditors.
Customers who have been given an unaffordable loan (see below for a definition of this) have the right to make a complaint and take it to the Ombudsman if the lender rejects it. People will normally get a refund of interest if they win their case.
A Scheme changes these rights:
- any affordability complaints have to be made within a 6 month window – no one can make a claim after that even if they did not know about the Scheme;
- the decision to uphold or reject the complaint is then made within the Scheme and there is no right of appeal to the Financial Ombudsman;
- people owed a refund in cash will only be paid a percentage of it as there is a limited amount of money that all refunds have to be paid from.
So the lender gains as they will pay less to settle these complaints and at the end of the Scheme there can’t be any more complaints.
Other similar Schemes
NSF is now the 5th bad credit lender to seek the protection of a Scheme that will limit the refunds it has to pay to its customers for unaffordable lending:
- schemes by ICL (payday loans eg the Money Shop) and Provident (doorstep lending) have completed. Each paid out about 5% to customers who had their claims upheld
- Amigo (guarantor loans) has had its Scheme approved. It is underway but Amigo has failed to raised the necesary capital. Amigo had originally expected its Scheme to pay 41% to customers with upheld claims. But many more customers have made complaints and the latest Amigo scheme report says the payout is now expected to be only about 17%
- Morses Club has also had a Scheme approved.
What is unaffordable lending?
A lender has to check that a loan is affordable for customers before giving the loan.
For Everyday Loans, this is a check on the affordability for the borrower (or borrowers where the loan is a joint loan);
With guarantor loans from George Banco and Trust Two, the loan has to be affordable for both the borrower and the guarantor. A guarantor has to be able to make the repayments out of spare income – simply owning a house does not mean that a loan is affordable.
The Financial Ombudsman (FOS) has set out what it looks at in an affordability complaint.
A simple summary is that when the loan was given it has to have been likely that you could repay it on time, without having to borrow more or get behind with bills. So if all the loan payments were made on time, the loan may still have been unaffordable if repaying it meant that your credit card balance or overdraft increased.
Recent loans are NOT included in the Scheme
The Scheme covers customers who borrowed or guaranteed a loan from Everyday Loans, George Banco or Trust Two before 31 March 2021.
It does NOT cover any loans made after March 2021. If you have one of these later loans this Scheme is not relevant.
Instead you can make an affordability complaint in the usual way:
- see Affordability complaints about large loans for a template to use for a complaint about an Everyday Loan that started after March 2021
- see Guarantor loans – complaint by a borrower and Guarantor loans – complaint by a guarantor for template letters to use about a Geroge Banco or Trust Two loan that started after March 2021.
If your complaint is rejected, send it to the Ombudsman straight away, as those articles explain. FOS will be able to look at these complaints as they are about loans that are not included in the Scheme.
The Scheme timetable
- 28 April 2023 – Court Convening hearing – approved the voting arrangements
- May & early June 2023 – voting on the Scheme.
- 22 June 2023 – Court Sanction hearing – approved the Scheme
- July to end December 2023 – customers have 6 months to submit a claim to the Scheme. Claims after this point will not be considered in the Scheme and will not be able to go to FOS.
- by end December 2023 – NSF raises enough money to continue and pays £14m into the Scheme to be distributed. If this is not successful the company is likely to go into administration.
- April 2024 – refunds paid from the Scheme.
Raising the £14m for the Scheme
NSF originally proposed two ways to raise new capital – Plan A and Plan B. Since March it has abandoned Plan A and now proposes:
a transfer of the Group’s business to the secured lenders in exchange for the release of a portion of their secured debt and the provision of a new lending facility. Part of the proceeds from this new lending facility would be used to fund the Scheme Fund and cover the costs of the Scheme.
This has not changed the amount of money that is likely to be available to distribute in the proposed Scheme.
Make a claim to the Scheme
How to send a claim to the Scheme
There is no downside to making a claim to the Scheme if you have found it hard to repay an Everyday Loan or one of their guarantor loans.
To send a claim to the Scheme, you must first set up an NSF Portal Account online.
To do this, you need your NSF Scheme Reference Number – this an 11 character reference looking like: SRNXXXXXXXX. This reference is on any letters, emails or texts you have received about the Scheme. (If you haven’t received one, or have lost it, contact NSF immediately by emailing firstname.lastname@example.org. You cannot submit a claim by email – this is just to get the portal account set up. )
Once your portal account is set up, you submit the claim through that account.
Already made a complaint? You still have to make a claim
Don’t ask me why – just do it. Some complaints may have been entered as claims but some may not have been. So you must try to make a claim.
With George Banco or TrustTwo loans then both the borrower and guarantor can make a claim.
For loans that have been repaid, a guarantor who has not made any payments will not get any refund and there is no point in making a claim.
But for current guarantor loans, it is a very good idea if both the borrower and the guarantor complain if the loan was unaffordable for them. This gives two ways for the guarantor to be released – if either the borrower or the guarantor wins their claim.
Claim as soon as possible
The deadline is 31 December 2023. Claims after that point will not be accepted and you will not be able to send them to the Ombudsman.
If you have a current loan, the sooner you make a claim to the Scheme the better. Any payments you make after you have made a Claim are protected – they will be put into a Trust Fund and you should be refunded these in full if your current loan is upheld.
Don’t use a Claims Firm to do this
It is very easy to submit a Claim. If you sign up with a Claims Firm, they will take a large amount of your refund just for entering your details into the Scheme.
What happens after you have made a Claim
NSF will decide whether to uphold your Claim.
I think it’s worth checking your Portal Account every month to see if there is an update there.
If your claim is rejected you can appeal this, but there will be a time limit. So don’t forget to keep looking for this.
What refund may you get?
If an affordability complaint is upheld in the Scheme, the compensation (called “redress”) is calculated:
- for upheld loans that have been repaid, the redress is the interest paid;
- for outstanding upheld loans, interest is removed so the borrower only has to repay in total the amount they borrowed. This may mean a lower balance is owed or that the loan cleared and a cash refund is due.
Where your balance is being reduced or cleared, this will be paid “in full”.
But where a cash refund is calculated, you will not receive that amount. The amount you will get will depend on the total cash refunds calculated and the amount of money in the Scheme to be distributed.
NSF says customers may get paid 24-31% of the calculated cash refund
This is a very uncertain estimate. It depends on how many people make a claim to the Scheme.
It also depends on how many of the claims are upheld and how many of the loans in each claim are upheld.
NSF is likely to remove loans that it decides are unaffordable from your credit record.
Should you carry on paying NSF for a current loan?
You are still legally liable for the loan – the NSF Scheme does not change this.
Ring-fencing new payments
NSF wants to encourage customers with a current loan to continue making payments while their claim is being decided in the Scheme.
So these payments will be “ring-fenced” when the customers has made a claim. Then they can be refunded in full if the claim is upheld rather than just a percentage being refunded.
However it may be 6-8 months before your claim is decided in the Scheme. That is a long while to have to carry on making payments to a loan which may eventually be decided to be unaffordable…
If paying is causing you problems
If you are currently struggling to pay NSF, perhaps being behind with priority bills or having to borrow more on credit cards or catalogues, then carrying on paying them for a loan that may be decided to be unaffordable is not a good idea.
In general, it is probably better for most people having difficulty paying one of these loans to stop paying or offer a low affordable payment. This will harm your credit record but if you later win the claim, that negative mark will be removed from your credit record.
If you are the borrower for a guarantor loan, NSF is legally entitled to ask the guarantor to pay if you do not, but they will not be able to take any legal action against the guarantor until your claim has been decided in the Scheme.
If you default on other debts or don’t pay important bills or borrow elsewhere in order to pay NSF, you may end up in a much worse position even if your NSF claim is eventually upheld.
To get specific advice on your case, I suggest you talk to National Debtline on 0808 808 4000, or visit your local Citizens Advice if you have problems with priority debts and bills.