A “Scheme of Arrangement” is in place paying some money to borrowers from the Money Shop, Payday UK or Payday Express who were given unaffordable loans.
The payout is now expected to start in May 2021 and to complete in June.
The claims portal has now closed.
See comments below this article for the latest news.
The following information comes from the Scheme reports. the latest is from March 2021:
- 182,566 Claims were received;
- the uphold rate was about 85%;
- the total compensation value calculated will be c. £340 million;
- the current estimate of the amount people will get paid is 4.2p in the pound
- it is now too late to submit a Claim.
No tax will be deducted from the amount you will be paid.
Where you still owe ICL a balance on the last loan, this has been “set off” against your refund.
If your last loan was sold to a debt collector, in most cases ICL has arranged for you to still have this set off. The exception is if your loan was sold to PRAC/BW Legal – see No set off in a Scheme/Administration when debt had been sold? for how these customers can complain.
Background to the Scheme
ICL had two million customers, with three big payday lending brands:
- The Money Shop was once Britain’s largest payday lender on the high street. The Money Shop stopped making payday loans in August last year.
- Payday UK and Payday Express were two large online lenders. These both stopped making new loans in October 2017.
In summer 2018, the number of affordability complaints about payday loans increased significantly. Paying refunds on these complaints forced Wonga and Wageday Advance to go under.
In the last half of 2018, ICL received 45,000 complaints. So ICL has been facing escalating costs in the last year and it has been closing shops. Now the business is being closed completely because of the cost of these complaints.
A Scheme of Arrangement is a legal device which limits a company’s liability to its creditors. See What is a Scheme? for more details. ICL is using this to limit the amount it has to pay out in refunds on unaffordable lending.
The Scheme was approved by creditors in September and by the Court on 8 October 2019. A claims portal was put live and all Claims had to be in by April 9 2020.
Only 4.2p in the £ – 80p was originally suggested…
This is a dismal update for the 155,000 people that should receive some compensation. Not only will it not be paid for another year, but once again the projected payout has fallen.
When the Scheme was proposed in August 2019, it was suggested people might get back nearly 80p in the pound.
My first thought when I saw the 80p in the £ estimate was “and pigs might fly“… see Will the Money Shop really pay 80% of your payday loan refund?
And that has turned out to be spot on…
In September it admitted that:
- it has decided to include all loans over 6 years which may reduce this to c. 44p.
- it has decided to simplify the assessment in favour of the customers, which may further reduce this to 27p.
- if twice as many people apply for a refund, this may go down to 14p.
By February 2020 in the previous quarterly report, the scheme administrators were warning this could be less than 10p.
So the latest report is a shocker. 4.2 in the pound is almost exactly what Wonga customers were paid.
The only people that are doing well from these administrations and schemes are the accountants and lawyers.
Why won’t the FSCS help these customers?
The Financial Services Compensation Scheme (FSCS) covered people making PPI claims if their firm had gone bust.
But the FSCS doesn’t cover payday loans. This was a very poor decision by the FCA.
Customers of the Money Shop, Payday UK and Payday Express have been let down badly by the UK regulators. The lenders were allowed to carry on giving loans that breached the affordability rules for years. And now there is no backup compensation scheme for when a lender goes under.
Did you borrow from other lenders?
If you have borrowed from other lenders, you may be able to get refunds from them.
Read How to make a payday loan affordability complaint which explains all this and has free template letters that have worked for thousands of people.
Updated May 2021