Morses Club went into administration on 17 November 2023.
Morses Club was the largest doorstep lender in the UK after Provident stopped lending in 2021. Last year it had 144,000 customers. Morses also provided some payday loans through a subsidiary, under the name Dot Dot loans – this subsidiary is also now in administration.
Morses employed 373 staff. The administrators have made 101 redundancies so far as there will be no further lending.
Why has Morses failed after setting up a Scheme?
Morses has been in trouble for years, mainly because of the cost of paying refunds to customers given unaffordable loans. It was losing about two thirds of cases at the Financial Ombudsman.
Doorstep lending is a very expensive operation. Morses charged very high interest rates – 343% APR on a one year loan – but it was only profitable when a customer borrowed more than once. And the more times a customer borrowed, the more likely they were to win an affordability claim.
In late 2022, Morses proposed a Scheme of Arrangement, hoping to be able to continue in business by capping the amount it had to pay in refunds.
This Scheme was approved and started in May 2023. It was expected to pay out customers due cash refunds at only 20%
But for Morses to be able to continue lending, it had to be able to refinance its debts, and it hasn’t managed to do this.
This is not a surprise – the combination of affordability claims and cost of living problems make this a difficult time for high cost lenders to find new investors, as Amigo found earlier this year.
What administration means for Morses and Dot Dot customers
The administrators will publish their Proposals for the administration in the next few weeks. It is the administrators’ role to realise the assets of a company and divide them between the creditors. This can take a long time – a year or more.
Customers of Morses and Dot Dot loans, past and present, are potential unsecured creditors because they may have a claim against the company eg for unaffordable lending.
The administrators say they :
will determine a process for agreeing creditor claims and will then contact relevant customers (including those who have already made a complaint), explaining what they need to do next in order to progress their claim.
However, they are warning there will be very little cash to distribute:
Any valid redress claims that are submitted in the administration of Morses Club will be able to share in the Early Termination Funding of £1.2m. At this stage, Morses Club estimates the total Scheme Claims to be in excess of £130m and therefore the anticipated distribution from these funds is not expected to be more than 0.9p in the £ (i.e. if you have a redress claim of £1,000 you would receive a cash payment of no more than £9).
Even if there is almost no cash, it would be normal in an administration for customers with an existing loan with Morses to be able to get their loan reduced or cleared if they have a claim upheld. It is unclear if this will include loans that have been sold to Lantern or Lowell.
What has happened to the Morses Scheme?
The Scheme has been terminated because Morses can no longer fund it. It is no longer possible to submit a claim to the Scheme.
The Scheme had been processing claims in monthly batches, so most claims have already been decided.
If your claim to the Scheme was upheld, you may have been entitled to 3 forms of redress:
- a reduction in the balance of any current loan;
- an immediate refund in full of some payments since the Scheme started at the end of May 2023, usually a small amount;
- a refund in cash for the rest of the redress. This was expected to be paid at about 20p in the pound late in 2024.
Most people with an upheld claim will already have had their balances adjusted and any small immediate refund paid (1 and 2 above.)
The administrators will explain what is happening to people with claims in the Scheme.
I know people are anxious about this, so I will make some GUESSES as to what is likely:
- anyone whose claim was upheld – it is likely you will become an unsecured creditor in the administration for the cash redress and get a low payout.
- anyone whose claim was upheld but who has not yet had a balance with Morses adjusted – I hope it will take place soon;
- anyone whose claim was upheld but who has not yet had a balance with Lantern or Lowell adjusted – I don’t know what will happen;
- anyone who has a claim rejected and appealed it – my guess is the administrators will consider the appeal;
- anyone who has made a claim but not yet had it decided – I think this will be treated as a claim in the administration.
Should you make an affordability complaint now?
A loan is “unaffordable” if you couldn’t make the repayments without borrowing more and the lender should have realised this when they gave you the loan.
This could be taking another loan, using more of a credit limit, getting deeper into your overdraft or by not paying a bill. So even if you always paid your Morses or Dot Dot loans on time, they could still have been unaffordable if paying them made your finances worse.
In general, an affordability claim is stronger the more loans you have had, or the larger they are, or the worse your situation was when a loan was taken.
What might you get:
- you may get very little back if you don’t have a current loan as there is little cash to distribute. But it is possible you could get any negative marks on loans removed from your credit record.
- if you have a current loan, complaining is more worthwhile as you may be able to get the current loan reduced or cleared.
The administrators will come up with a process for making these claims. This will be explained in their Proposals.
Do you have a current Morses or Dot Dot loan?
Even though they are in administration, you still owe the money. You are not expected to pay the full amount immediately.
The administrators say:
any payments due in respect of your outstanding loan balances should continue to be paid as normal, as not doing so is likely to impact your credit score and ability to borrow.
But there are two reasons why you may not want to carry on making payments.
The first is if you are struggling to pay:
- you should phone the Morses Customer Service team on 0330 045 0719 and ask for a payment arrangement;
- if they ask you to pay more than you think you can afford, leave a comment below this article. Or talk to National Debtline on 0808 808 4000.
The second is if you think you are likely to have a claim for unaffordable lending upheld:
- if your claim is upheld it is likely that any refund will be used to reduce the current balance;
- if you carry on paying the loan, you may be concerned that you will lose out. This may not be a problem in practice, but it needs the administrators to confirm this;
- if you stop paying now, your credit record may be harmed – this should be wiped clean if you have a claim upheld but there is a risk it may not be. If your credit record is already poor, you may not be worried about this;
- some of this should be clearer in the next few weeks.
This post will be kept updated
If you aren’t sure what is happening, come back here in a few weeks. Or ask a question in the comments below.