The Financial Ombudsman (FOS) has published two Decisions involving payday loans over six years old:
- Mr H has complained about fifty-four payday loans Lender C lent to him between March 2010 and September 2014.
- Mrs W’s complaint is about nine short-term (often referred to as ‘payday’) from Lender D between November 2009 and July 2012.
In each case, FOS has decided that its rules allow it to consider complaints about loans over six years old because the customer in the case has made the complaint within three years of finding out they could complain.
These are important decisions
These two cases are published in the Technical section of the FOS website, which the FOS describes as:
intended primarily for businesses, consumer advisers and other professionals who are comfortable with technical information – and want more in-depth analysis. It sets out the ombudsman’s usual approach to the disputes we see involving the financial products and services that are complained about most.
Normally Ombudsman decisions are published giving the name of the firm but keeping the customer anonymous. But here the lenders aren’t identified as FOS considers that these decisions cover common situations and will be of general interest.
How many cases will be affected?
In May 2018, a Debt Camel reader sent a Freedom of Information request asking how many people had cases against QuickQuid on hold because they were waiting for a decision on whether the Ombudsman was able to consider them. The reply from FOS ws that no specific figures are kept on these, but there are about 1,500 QuickQuid cases awaiting a jurisdiction decision by the Ombudsman and the oldest of those cases was 25 months old.
Jurisdiction issues are not common and are normally resolved reasonably quickly. So my guess is that the large majority of those 1,500 cases are related to the 6 year rule.
And that is just one lender. So these two newly published decisions are relevant to thousands of cases already at the FOS and many more potential complaints.
Background to these decisions
The FOS’s rules about time limits
Cases have to be brought to the FOS within a certain time. These limits are set out in the FCA’s DISP 2.8 rule and the relevant part is:
The Ombudsman cannot consider a complaint if the complainant refers it to the Financial Ombudsman Service: …
(2) more than:
(a) six years after the event complained of; or (if later)
(b) three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint.
So for these affordability complaints where the payday loans are more than six years old, the question is whether the “three years from the date the complainant became aware” part applies.
How these time limits have been applied before September 2018
Payday loan affordability complaints started to be made in late 2015. Some early complaints were upheld by the Ombudsman for loans over six years but most were rejected. But customers kept pointing out they had no idea that they could complain before.
In the summer of 2016, the FOS put all cases involving loans over six years old on hold, while they decided whether they could look at these older loans. This took until November 2016 when FOS sent letters to a number of lenders saying that it thought it could look at older loans, see my article from that date: Ombudsman will look at payday loans over 6 years old. After that several lenders started paying out on at least some older loan cases, as that article describes.
However Wonga and QuickQuid have put forward a variety of objections to the 2016 FOS decision over the last 20 months. And their cases have remained on hold. The following response from FOS to a reader with one of these cases was typical:
we’ve been speaking to [QuickQuid] about cases like yours – and they still insist we can’t look at any loans taken out more than six years before the complaint was made. We’ve explained that we think we can in a couple of cases. And they’ve come back to us with quite a bit of further information – and we’re in the process of considering what this means for cases, including your one.
The two decisions
These two decisions are together 46 pages long. It is unusual for an Ombudsman’s decision to be more than a few pages, but in these cases the length is to enable each Ombudsman to consider all the arguments on their case.
I am not going to attempt to precis them, I will just pull out a few points from the two decisions that seem to me to go to the heart of the cases:
Mr H would also have been aware, or ought reasonably to have been aware, that he was paying an increasing amount of interest the more loans he took out. So I think that Mr H also ought reasonably to have been aware that he may have suffered a loss, or that he was suffering a loss as he was taking out these loans. But I wasn’t persuaded that Mr H realised that Lender C might’ve been responsible for his repayment problems – nor did I think that Mr H ought reasonably to have made that connection either. In my view, Mr H would, quite reasonably, have seen Lender C’s offer of further loan as a solution to his problem, rather than a cause of it.
Mrs W appears to be an intelligent and articulate individual who is capable of using the internet to access information. But I do not think it necessarily follows that a reasonable person in those circumstances, who became aware of affordability problems with her loan and who understood that she had suffered loss as a result, would also become aware that her difficulties could be due to failings on the part of the lender. In my view, a reasonable person in Mrs W’s circumstances would be more likely to take personal responsibility for the difficulties she faced.
I am satisfied that a reasonable person in Mrs W’s position could not reasonably be expected to have understood from her contract with LENDER D that the lender had an obligation to check that her loan was affordable before agreeing to provide it to her.
I fully appreciate that LENDER D feels strongly about this complaint, but having considered all of the evidence provided by the parties in this case … I am still not persuaded that Mrs W ought to have been aware of her cause to complain about any of these three loans any earlier than she says she did become aware (which I am satisfied was within three years of her complaint).
What happens now?
Will all payday loans over 6 years be considered?
These two decisions are not general decisions that all loans over six years will be considered. This is stated clearly in the second decision:
LENDER D says that, in taking this position, it amounts to a policy decision by the Financial Ombudsman Service that because of the prevailing circumstances in 2009 and 2010, customers who had taken short term loans which they knew were unaffordable would not have had cause to complain. To be clear, that is not what has happened here. As the deciding ombudsman, I am making this decision based on the circumstances of Mrs W in this particular case.
The FOS does not operate a system where its previous decisions set binding precedents for subsequent ones. But by publishing these two cases in the technical section of its website, the FOS is saying that it considers the approach will be generally applicable.
There may however be a reason in a different case why FOS will decide that a customer, say Mr X, should have known enough to have complained earlier. And, of course, a lender could argue in any case why FOS is not able to consider the older loans.
But if the circumstances of Mr X are similar to those of Mr H or Mrs W in the two published decisions and the lender’s argument has already been considered in the decisions, then it would be expected that the FOS would reach the same decision, that it did have jurisdiction to consider the loans.
Can the lenders carry on objecting?
After these two general decisions, it seems to me that lenders can either
- broadly accept them, but dispute the occasional exceptional case with FOS;
- decide to challenge a decision by the FOS in court, by asking for a judicial review; or
- reject many adjudicator decisions that FOS has jurisdiction and ask for an ombudsman review.
The second option seems unlikely to succeed given the exhaustive detail that the FOS has gone into in its decision making. The third option would be contrary to the FCA DISP 1.3.2A which says that firms have to ensure that lessons learned as a result of determinations by the Ombudsman are effectively applied in future complaint handling.
So, if this is right, then the lenders will have to accept these decisions for the most part and just challenge a few if any cases.
TWO UPDATES
- On 15 October the FCA wrote a Dear CEO letter to the payday lenders which said they should take account of these FOS decisions. See Dear Payday Lender CEO – should you start a redress program?
- In October QuickQuid seems to currently be ignoring these decisions. See QuickQuid – misleading customers about loans over 6 years old.
FOS will ask people how and when they found out they could complain
The FOS currently asks people complaining about older loans when they found out they could complain. After these decisions, I expect this to continue.
If you are asked this, the FOS doesn’t want a legal argument, it wants a brief description of your case:
- describe what it was like while you were borrowing. Perhaps you were trying to cope with a reduced income and not get behind with the rent. If you thought the lenders were helping you by giving loans and that your situation was your own fault for borrowing too much, then say so. If you had a gambling problem, then mention that. If you had no idea how much you had borrowed and have been horrified to discover what it added up to, say that.
- if you have had debt advice, been in a debt management plan or an IVA, think if any debt adviser ever mentioned affordability complaints. If they didn’t, and your payday loans were just treated the same as your other debts such as credit cards, then say this. After all, if debt experts didn’t tell you about these complaints, how could you be expected to know?
- also say how and when you found out that a lender had a regulatory duty to lend responsibly and check if you could afford to repay the loans. You may have heard about payday loan refunds with the TV coverage after Wonga went into administration this year; you may have seen a Facebook advert from a claims company; or a friend told you about irresponsible lending complaints.
There are no wrong answers here, just say what happened to you.
For each case FOS also needs to consider if the lending was irresponsible
Once FOS has decided in a case that it can look at the older loans, the cases need to be looked at to determine if the complaint should be upheld and a refund given. the two published decisions are not decisions that Mr H and Mrs W should get a refund for their over six year loans, they are just decisions that FOS can consider if they should.
So the cases that have been on hold now need to be considered. I hope the lenders and FOS will be trying to ensure that this is done in as speedy a way as possible.
What about Wonga cases?
At the moment it is unclear how the administrators intend to reach a decision on the size of a refund a Wonga customer may get. I would hope that these two decisions mean that the administrators take loans over six years into account. But whatever the refund decided is, it is very unlikely to be paid in full as the administrators have warned there is likely to be insufficient money to pay all the unsecured creditors.
One reader who has had a Wonga case on hold for over a year because of the six year issue says she feels gutted at the possibility she may now get very little back.
What about non payday lending affordability complaints?
Although FOS has published these two decisions under the heading of Example payday lending cases, the responsible lending duty also applies much more broadly to other forms of credit. I can see no reason why similar decisions would not be reached in other cases.
Were your payday loans unaffordable?
6 challenges for regulators after Wonga
Why have Vanquis delayed ROP refunds?
John says
So say you had accepted the lenders offer even though it didnt included any loans over 6 years, would you now have a fair case with those loans now under this ruling?
Sara (Debt Camel) says
That may depend on the reply the lender sent you.
If it didn’t mention that you had the right to take your complaint to the Ombudsman, then yes, I think you may be able to start a new case.
If it said you did have the right to take the complaint to the ombudsman but it also clearly stated that the Ombudsman would not consider loans over 6 years, it’s possible you might be able to start a new case saying that you were misled by the lender. In this case, could you find the reply from the lender and copy it in here?
sw says
That sounds like positive news then – I hope mine gets sorted soon. Been 25 moths now with QQ.
Sara (Debt Camel) says
it is VERY positive news.
Adam says
I’ve had a Wonga case on hold for a year now. Opened my complaint September 2017.
Details are at around 20 loans over around 5 years – estimated interest around 2.5k.
Two of the loans opening dates fell outside the six year window (Aug 2011), the settlement of them didn’t.
FOS have repeatedly said that they need to consider the timeline but nothing more than that.
I do hope they can come to a decision soon because the likelihood of the full amount is diminishing by the day! Gutted that Wonga went into administration (easy way out perhaps??) but this feels like good news.
Sara (Debt Camel) says
See Wonga refunds – Latest News for any future developments. Although today’s announcement isn’t bad news for you, if the administrators have little money left for unsecured creditors it may not make much difference to what you get :(
Mike says
Morning Sara,
So in simple terms how does this affect individuals like myself who have complaints on hold as they are over the 6 year bracket with Quick Quid? Do you think our complaints will now be addressed?
Thankyou
Sara (Debt Camel) says
Yes! Of course it’s possible QQ will decide to go to court. That seems to me to be unlikely though.
But with so many cases on hold it may take a while.
I think lenders, including QuickQuid, should be learning from previous ombudsman decisions and making better offers in the more clear cut cases. If this happens, and I suspect the FOS and the FCA are encouraging it, then things may speed up.
I have seen a few straws in the wind in the last few weeks that QQ is settling some cases earlier – every case sorted early, will help to speed up the ones where there has to be a full FOS decision.
Chris says
Sounds like good news!
Thanks for the update Sara.
Mike says
What about complaints like mine where there was an argument for looking at loans over 6 years old, but the adjudicator said they couldn’t. I was paid out but it might have been a whole lot more with an extra 3 years interest.
Surely they must look at these cases again?
Sara (Debt Camel) says
Probably not – you could have asked for the case to go to the Ombudsman to be looked at.
mike says
But they said they weren’t looking at loans over 6 years old. The ombudsman I mean also!
Sara (Debt Camel) says
So you had an Ombudsman level decision on this?
Alice says
I did, my wonga case went to the adjudicator and then ombudsman in 2016, he wouldn’t allow the older loans to be looked at for redress but allowed them to be looked at for the history and continuous borrowing. He ruled over 6 years could not be paid out on. Then my pduk and QQ went to adjudicator a few weeks later and he said they couldn’t look at them.
Sara (Debt Camel) says
I am afraid there were some inconsistent decisions being made in the first half of 2016 before FOS decided to put them all on hold. I would be very surprised if any of the cases can be re-opened.
Jaz says
I had a claim on Quick Quid where [a claims company] got me a settlement but it was only for the 7 loans I had after 2011 not the more then 10, some rolled a lot, before. Can I now get another refund?
Sara (Debt Camel) says
Very unlikely. The claims company would have accepted the offer in full settlement of all your claims against the lender.
If you feel you were misled by the claims firm, you could complain to them. This may be another case of the claims firm wanting any money quickly rather than discussing the situation with you and asking what you wanted to do.
Martin W says
Sounds like excellent news that over 6 years loans will possibly be looked at but not so from a FOS resourcing perspective as the process is woefully slow to begin with without adding in all the loans currently on hold. Hopefully they’ll get some more staff or speed up the process somehow. Maybe even the lenders might start reviewing cases properly instead of frivolously rejecting everything. (and pigs might fly obvs!)
Sara (Debt Camel) says
I think the pigs may be having flying lessons…
C says
Great news Sara.
I have declined for those with QQ over 6 years to be considered in the hope it would speed up the process.
However, as the case still isn’t with an adjudicator (sent March 1st) I’m going to call the FOS now to have them included on my case as it’s an extra 4k.
Thanks for the update Sara.
Alice says
Hi, so I had two claims rejected by adjudicator because of the 6 years before they started to put them on hold, am I allowed to ask them to take another look?
Sara (Debt Camel) says
Well you could ask but I would be surprised if they agree, because you could have asked for your case to go to an Ombudsman.
Alice says
Ok thank you, because it was a flat out no in may 2016 ‘no we cannot look at things over 6 years old’ And I did email and ask for it to be reconsidered and got yet another refusal I didn’t know that I could ask for an ombudsman and he didn’t tell me I could. I do have the emails still but I guess it’s my fault for not knowing what I know now. Thank you thou :-)
Mr and Mrs C says
Hoping this is good news for all of us. We currently have a case with FOS for QQ and left in over the 6 years as that was the majority of loans
This is the interest paid over the years:-
2010 £1298.5
2011 £2275
2012 £1580
2013 £2075
Fingers crossed for a good outcome for everyone – especially those of us who will probably lose out with Wonga as we didn’t find out about all this refund lark till March this year :(
TC says
Great news. Even more so considering I contacted QQ this week offering them a reduced settlement if they settle my case early, they rejected it which could end up quite costly for them!
Would I get interest up to the date of the decision or only up to the claim date?
Sara also could you contact the FOS and see if they can give you a time frame on when they expect to catch up on all of these cases? I am wary that if loads of us start bombarding the FOS for updates we may delay the whole process further. Would be much appreciated.
Sara (Debt Camel) says
8% statutory interest is up to the date the refund is calculated, so s few days before being paid.
Bamboozal says
Yeah.
It looks like my previous comments may have worked to hurry things along.
M M says
This is indeed encouraging news. As my last communication with the FOS regarding my 6yr+ claim with QQ is still adjudicator level, do you think I will get an adjudicator decision a bit quicker than the 1500 QQ cases with ombundsman that you have cited? Or is the 1500 inclusive of adjudicator level cases also?
Sara (Debt Camel) says
FOS were asked how many QQ cases were currently on hold because of the 6 year rule, they said (and I am paraphrasing) they didn’t keep records that allowed them to answer that easily but there were about 1500 QQ cases awaiting a ruling on whether FOS has the jurisdiction to look at them. My guess is that your case would have been one of these, but it is a guess. Most cases on hold are either at adjudicator level or pre adjudicator I would have thought.
Ann Reynolds says
Could this mean my mum’s case with provident may make a little progress soon? They delayed loads and finally said they refused to consider as all loans were older than 6 years before the complaint was made. FOS have recently written to say they are working on this point but the case has been with them since November 2017, original complaint made to provident in September 2017
Mike says
Good evening Sara, I contacted FOS regarding my QQ over 6 year loans complaint.WOW……response was..
Unfortunately I cannot give you any timescale or update regarding when your complaint will be assessed. We currently have around 8,000 complaints that were placed on hold while the jurisdiction issue was resolved.
There is a small team working cases such as yours at the moment and the cases are worked in strict age order, so to be fair to our consumer’s the oldest cases will be worked first.
As soon as your case is assigned to an adjudicator to assess your complaint, they will be in touch to introduce themselves. I’m sorry
Can’t update you anymore at this time.
Sara (Debt Camel) says
8000! Many of them will be Wonga cases, and they may soon be removed from the Ombudsman.
Apart from individual cases being worked on, the Ombudsman is also trying to encourage lenders to speed up the process by resolving the, let me say, more obvious complaints more quickly.
Gareth says
I have a case with FO against provident it’s been with them since july/August 2016 (adjudicator not upheld) and waiting for it to get to an ombudsman since October 2016 (due to 6 year rule) been over 2 years so what’s another 6 months lol.
Sara (Debt Camel) says
After so long it’s worth pushing though! Especially as it’s not a payday lender – although exactly the same approach should apply to doorstep loans, FOS has always treated them separately. I suggest you go back to them and say that you want your case to go to an Ombudsman as soon as possible, that you have been waiting for an unreasonable length of time and that you want the Ombudsman to take into account the two decisions on over 6 year payday loans published recently in the FOS’s technical section (give the links) as they seem to you to be directly relevant to your case. If you haven’t already been asked by FOS when and how you heard of affordability complaint, also write out a clear statement about that.
Bill says
Hi Sarah,
Cheque centre, what’s happening with them? I managed to get in tough with an administrator in Scotland, told me by email they will not look at loans over 6 years, most of mine where in 2009, 2010, also said if successful for loans to be upheld they will only pay 5p in the pound in compensation
Sara (Debt Camel) says
You can talk to the Ombudsman, but they are in administration and haven’t been paying out in full for many months :(