Does gambling make it harder to get a refund from a payday lender? Many people who have made an affordability complaint and asked for a refund of the interest they paid are worried if there is gambling showing on their bank statements.
Gambling is an issue for a significant number of payday loan complaints. The availability of easy credit from payday loans, even in the middle of the night, can fuel a gambling habit. And the money then lost on gambling makes people desperate to get through the rest of the month, needing more credit, even if they earn what looks like a good income.
The comments below the main Can you get a payday loan refund? article are usually very reassuring when someone asks about this. Lots of people who had gambling problems have described how they were worried but it didn’t cause trouble for their complaint.
But people still worry, even after others have said they were all right. So this article looks at some Financial Ombudsman decisions that have involved gambling and payday loans. If you want to see more for any lender, you can look them up on the FOS website. But it is the general approach to gambling that matters here, and they are the same across all lenders.
Only Ombudsman decisions are published. All cases are dealt with in confidence – as you will see below, all the published cases are anonymous.
Quick Quid – gambling just accepted as expenditure
Case 1: The Ombudsman doesn’t mention the gambling at all in his provisional decision, for example:
We have looked at Mr H’s bank statements for the relevant period, which show that he was juggling and revolving an increasing number of loans from various lenders in order to avoid defaulting. Even very basic additional checks by Quick Quid would have revealed that, and would have demonstrated that the loans were, in fact, unaffordable for Mr H.
Quick Quid then objected to this decision, saying (among other things):
It can see that Mr H made a significant number of gambling transactions on his bank account. In the circumstances, it feels that Mr H should be held accountable for his failure to tell Quick Quid about his gambling, any potential gambling addiction and any financial struggles.
The Ombudsman didn’t think this was relevant:
The final points made by Quick Quid do not, in my opinion, add materially to what it had already said. The key point that I made in my provisional decision is that the overall warning signs, which should have been apparent to Quick Quid from the July 2011 application onwards, were such that it should have made some simple additional checks before lending any further money to Mr H.
Case 2: This case is interesting because there was gambling and the Ombudsman remarked on it, saying:
proportionate checks would’ve also shown QuickQuid that a substantial portion of Mr R’s income was going on gambling. And I think that if QuickQuid would’ve seen this, it wouldn’t have lent to Mr R in these circumstances.
But although QQ disagreed with the ombudsman, it didn’t mention the gambling or attempt to suggest that it was the borrower who was at fault because of the gambling.
Mr Lender – irrelevant that borrower didn’t say he had a gambling problem
Case 3: Here Mr Lender argued that they made “proportionate” checks. The Ombudsman disagreed:
I disagree with Mr Lender that it can only carry out checks which have been suggested by the FCA. The FCA is simply making suggestions, not giving instructions. The obligation is on Mr Lender to carry out proportionate checks, which may include taking steps such as looking at a consumer’s bank statements.
And the fact the customer had told the lender he had a gambling problem isn’t relevant:
if it had looked at Mr H’s bank statements, it would’ve quickly realised Mr H was gambling and that Mr H couldn’t afford to repay. I don’t think Mr H’s failure to tell Mr Lender about the gambling means he shouldn’t receive compensation as Mr Lender didn’t carry out proportionate checks.
Interestingly the Ombudsman here increased the award the adjudicator had made significantly, by including two instalment loans in the ones to be refunded.
Satsuma – low loan sizes didn’t mean the loans were affordable
Case 4: Mr G had a high income – £5,000 a month – and the adjudicator decided Satsuma wasn’t wrong to make the five loans. But Mr G had been late making payments of the first two loans and the Ombudsman decided Satsuma should have looked more closely at his situation, seen his large gambling habit and he was awarded a refund for loans 3-5:
the fact that the amounts borrowed and the interest paid might have been low in comparison with Mr G’s income, or that he’d been managing to repay the loans in full and on or before time, didn’t necessarily mean the loans were affordable for him, or that he managed to repay them in a sustainable manner.
Payday UK – gambling wasn’t discretionary
Case 5: Payday UK argued that the adjudicator shouldn’t have considered gambling transactions as part of Mr C’s expenditure when looking at affordability as they weren’t essential expenditure. The Ombudsman didn’t agree:
Mr C’s bank statements show he was regularly spending quite a lot of his income on gambling by this point. So if Payday UK (having a full understanding of his circumstances) was thinking about what Mr C would have available the following month, based on his previous spending patterns I think it’s likely he would’ve continued to spend similar amounts on gambling. I don’t think it’s fair to say Mr C’s spending on gambling was discretionary at this point.
The Money Shop lends even when it knew about previous gambling
Case 6: This is a pretty shocking case where a customer’s parents had settled his payday loan debt with The Money Shop on the express condition that they never loaned money again to their son because of his gambling problems. But:
So it seems likely that The Money Shop would – or should – have had some record of Mr H’s problems with gambling and that he might be vulnerable. It nevertheless chose to give him another loan in 2016.
Of course, the customer may have completely stopped gambling and it would fair to lend him money – but the Money Shop didn’t ask to see bank statements to show this and just gave the loan. It’s unusual to get a refund for a single loan complaint, but this is an example of one.
SafetyNetCredit ignored customer’s gambling
Case 7: SafetyNetCredit are an unusual lender as they demand access to customers’ bank accounts. As the Ombudsman says:
I agree that looking at a potential borrower’s actual income and expenditure is a worthwhile exercise and should be more accurate than expecting someone to recall exactly what they spend each month. However, considering the circumstances of this particular complaint I’m not persuaded that Mr M’s circumstances were considered appropriately.
In this case, the borrower was on a good income:
As part of my investigation I’ve also considered that Mr M was working and typically received an income in the region of £3,000 each month. Some months he also received a bonus in addition to his regular salary. This income is not however significant when comparing it to Mr M’s expenditure.
[SafetyNetCredit] had more than enough information to accurately consider Mr M’s financial position… it should have been obvious that Mr M was living beyond his means, which was likely to have been caused by his compulsion to gamble. I think that the lending from SafetyNetCredit, and other parties, was used to fund his gambling or other existing commitments, which he couldn’t afford because he’d already spent money on gambling. It seems as though he was caught in a significant cycle of lending and gambling.
247 Moneybox should have asked more questions
Case 8: This case has a couple of quite common features of payday loan complaints where gambling is significant: a poor credit record showing a lot of borrowing and the customer, desperate for a loan, may have reported lower expenditures than they had.
The Ombudsman notes on the credit record issue:
I don’t think this [credit record] information means 247 Moneybox shouldn’t lend to Mr S. I think the information should prompt it to ask about Mr S’s income and expenditure to assess whether the loans were affordable.
And on the under-reporting of expenditure, the Ombudsman here decides:
Mr S says his expenditure was higher than he’d told 247 Moneybox. But I think 247 Moneybox was entitled to rely on the information Mr S provided unless it had reason to question it. I don’t think it was unreasonable for 247 Moneybox to assess the first five loans (of amounts between £100 and £400) as affordable.
But in May 2015 Mr S asked for a £500 loan. This was the fifth time he’d asked for a loan shortly after repaying the previous loan and the amounts of the loans were increasing. I think this should have alerted 247 Moneybox to a possible problem. I think it should have questioned the information provided by Mr S.
If they had looked in detail at the customer’s finances:
There are payments to other payday lenders and a large number of payments to online gambling sites. I don’t think further borrowing was affordable or sustainable and 247 Moneybox would have known this if it had carried out proper checks.
Lending Stream – should have been alert to warning signs
Case 9: Lending Stream had given a series of instalment loans to the customer over several years. It argued that:
it was for Mr P to provide accurate information about his income and outgoings. It said it wasn’t required to make further checks if the loans looked affordable.
The Ombudsman agreed that Lending Stream did enough checks on the first loan and was entitled to rely, at that point, on the customer’s information about his outgoings. But:
we’d expect a lender to be alert to any warning signs of financial difficulties that might trigger concerns about a dependency on payday lending or that further checks were needed.
Lending Stream has agreed that its own check showed that Mr P’s credit score for his second loan was low. Lending Stream’s check showed that Mr P was heavily and increasingly in debt to a range of lenders. The amount of his debt had increased greatly by the time of his second loan. He still hadn’t repaid his first loan. I think this should have alerted Lending Stream to make further checks on Mr P’s circumstances.
… He had credit card and short term loan debts. He was reliant on increasing short term loans to fund his gambling habit and his living expenses. I think if Lending Stream had made further checks it would have seen, as I have, that Mr P was dependent on short term loans. And so it would have decided that giving him further loans would be irresponsible.
Small numbers of loans
Not every complaint involving gambling is upheld. Cases where someone only borrowed one or two times are always difficult one to win, not because of the gambling element but because the lender often just didn’t know enough to see that the borrower could be in trouble.
Case 10: A Myjar case involving five loans. Here the lender had offered to remove the interest from the last loan and accept a repayment plan but the customer felt that was insufficient. The Ombudsman agreed that only refunding the last loan was reasonable as the loans were small so the checks made were proportionate.
Case 11; A QuickQuid case with just four loans where the Ombudsman said to refund both of loans 3 and 4 – a good result. here loans 3 and 4 were much larger than loans 1 and 2 and all four loans were within a very short period so QuickQuid should have been alerted to the borrower being in trouble despite the fact he had a good income.
All cases are individual, so tell your story
Each complaint at the Ombudsman is treated as an individual case. If one of these cases above looks a lot like your situation, this doesn’t mean you will get the same result. But as you can see from these cases, the Financial Ombudsman doesn’t start from the position that it is your fault you were wasting your money on gambling. The consistent theme is that if you were borrowing regularly from the same lender, then that lender should have realised you were in trouble.
So when you are sending a case to the Ombudsman, be completely open about your gambling problem and the way it interacted with your borrowing from this particular lender. Just tell your story. And don’t worry about sending your bank statements – they are the evidence that supports your complaint.
What about other sorts of debt?
It’s not just payday loans that you can make affordability complaints about:
- complaints about credit cards aren’t as easy to win, but if your credit limit was increased to a daftly high level, give it a go;
- in 2019 and 20120 lots of people are winning complaints about Amigo and other guarantor loans because the lender did not check bank statements which would have showed a lot of gambling.
- large bad credit loans are also worth a try – the larger the loan, the more the lender should have looked at your situation.
If you are still gambling…
You can make a payday loan complaint if you still have a balance owing to the payday lender (or debt collector if it has been sold). But making these complaints if you still have a gambling problem is pretty pointless. If you get any money back you will be donating it to the bookies and their shareholders…
I know it’s hard, but you need to stop gambling first. Then when you have been “clean” for a while, these complaints can help rebuild your finances. So read How to escape from the payday loan trap on how a debt management plan can help and How gambling wrecks your finances which looks at the different ways to get help.