On September 13, Instant Cash Loans (ICL) updated the information about the Scheme of Arrangement it is asking customers to vote on, saying:
Over the previous weeks, we have been refining how we will assess complaints made to us in the Scheme, and there have been some important developments, which might affect how much consumers might get in the Scheme.
This Scheme will affect the 2.6million previous customers of Money Shop, Payday UK or Payday Express who had unaffordable payday loans from these lenders.
The regulator says that a loan is only affordable if you could repay it without hardship and without borrowing again. Millions of payday loans were unaffordable. The more loans you had, the more likely it is that the loans were unaffordable.
What is a Scheme of Arrangement?
A Scheme of Arrangement is a legal device which limits a company’s liability to its creditors.
If you were given a loan which was unaffordable, you have a Claim for a refund of the interest you paid.
Everyone with a potential claim is a possible creditor. And creditors can vote to approve or reject a Scheme of Arrangement.
Now more people will get refunds … so they will be paid a lower percentage
ICL has clarified some points about how it will assess which customers should get a refund in the Scheme, saying:
- it will look at all loans, including those over 6 years old. Previously the Money Shop, Payday UK and Payday Express had asked customers questions about older loans and why they had not complained sooner, and then rejected many of these complaints;
- to simplify its assessment, it will be giving customers “the benefit of the doubt” in some cases and so refunding more loans;
- more customers may apply for a refund under the Scheme than it had previously assumed.
As a result of these changes, it now expects the value of refunds it approves will be much higher, so people will get paid a small percentage of their refund.
On August 14, it had said that it expected to have enough money to pay out nearly 80p in the pound. But now:
- Including all loans over 6 years may reduce this to c. 44p.
- Simplifying the assessment may further reduce this to 27p.
- And if twice as many people apply for a refund, this may go down to 14p.
These numbers can never be exact. If the extra customers who apply all have a lot of loans over 6 years, the final figure could be lower. But if the extra customers only have a few recent loans, the final figure could be higher. And, of course, more customers could apply than ICL’s latest guess.
Some clarity at last! But why has it taken so long?
I am pleased ICL has provided better estimates. As I said in August, 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?
It is also good that ICL has now agreed to stop being difficult about loans over 6 years old, coming into line with what the Financial Ombudsman has been saying for years.
I am disappointed it has taken ICL so long to admit that it is unlikely to payout anywhere near 80% of the calculated refunds.
Many people will already have voted on the Scheme on the basis of the previous information. Some of them may feel that they were misled.
But if the Scheme pays out 14p in the pound, it will still give a better result for customers than ICL going into administration.
Have you voted? The deadline to vote online is Friday September 20
In August I suggested that people wait a while before voting, as more information may come out. Now we have that information, it’s time to decide how you will vote, for or against the Scheme.
To vote online you need the Voting Reference Code you should have been sent in an email from ICL. That, with your date of birth is all you have to supply.
If you do not have this Code, email email@example.com or call 0203 901 7440.
You can also vote in person from 11am on 24th September 2019 at Notts County Football Ground, Meadow Lane, Nottingham, NG2 3HJ.
Background to the Scheme – increasing numbers of affordabilty complaints
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.
How the Scheme will work
On August 9, ICL received court approval to call creditor meetings. It is now sending everyone an email with an Explanatory Statement with further details about the Scheme and how to vote. These started to go out on August 14.
The next steps are as follows. Each step assumes the previous steps were passed/approved:
- September – meetings of creditors will be held to vote on the Scheme. As a creditor you can vote online before 20 September or vote in person in Nottingham on September 24.
- After approval, customers who have not sent in a complaint will have 6 months to submit a claim.
- All claims will be assessed and if they are decided to be valid, a redress amount will be calculated. There will be some appeal mechanism.
- There will be c £13.6m available to be divided up between the successful Claims. How much you are likely to get will depend on how much interest you paid and how many people submit claims. If a lot of people make claims, you may only get a small amount, but if many people don’t bother it could be larger.
- Payouts are expected to be in late 2020.
I will be updating this article as there is more news. And the comments below show what other customers are thinking.
Existing complaints – and new ones
ICL has already settled some complaints in full.
All other complaints will go into the Scheme. This applies to complaints currently with ICL, including loans from the Money Shop, Payday UK and Payday Express. ICL will not be doing any further work on these complaints. If you are waiting for a response, or have sent in bank statements as requested, nothing further is going to happen.
FOS will not now look at these complaints so there is no point in sending them a new complaint. FOS has stopped work on complaints already with it.
If you send a complaint to ICL now, it will be on hold until the Scheme is approved. There is no hurry to do this and you will have to resubmit your claim after the Scheme is approved, so you may as well wait until then.
Don’t let a Claims Company send in a complaint for you now. The procedure to submit a Claim will be a simple form. A Claims Company will do nothing but fill out your name and address on this form – you can do that yourself!
Did you borrow from other lenders?
This email from the money shop may the first time you have heard about affordability complaints or getting a refund of payday loan interest.
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 September 16