Britain’s largest doorstep lender, Morses Club, is considering a plan to reduce its liability to pay compensation to customers mis-sold unaffordable loans.
The announcement on 20 July 2022 of a possible Scheme of Arrangement would cap the amount of money Morses has to pay in refunds.
It wants a Scheme because it is facing increasing numbers of affordability complaints. It says:
A key objective of a potential Scheme would be to treat all customers equitably and settle eligible Redress Claims over a period to be defined. The Directors believe that a successful Scheme would provide more certainty in respect of the total liability for Redress Claims and help to secure the longer-term stability of the Company…
Whilst the Directors consider that Morses Club has adequate liquidity for the immediate future, they believe that without a potential Scheme, the level of Redress Claims could jeopardise the Group’s future.
Morses Club currently has 144,000 customers. It became the largest doorstep lender after Provident exited the market last year.
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Background – what are doorstep loans?
Morses agents visit customers in their homes to set up loans. Some customers pay the loan installments to their agent every week, others pay through the app. Doorstep lending is also known as home-collected credit.
This is a very expensive business model. Even at Morses very high interest rates – 498% APR on a 35 week loan and 343% APR on a one year loan – it is only profitable when a customer borrows more than once.
Research for the FCA has shown how repeat borrowing in the home collected credit market is very frequent:
Some of the home collected credit customers in the qualitative research had been using this form of credit for so long they couldn’t accurately remember when they started. One customer now in his late sixties had started using home collected credit after he was forced to give up work following a major heart attack at 45.
The FCA says:
We have significant concerns that repeat borrowing could be a strong indicator of a pattern of dependency on high-cost credit and levels of debt that are harmful to the customer.
Morses is getting a lot of affordability complaints
A loan is only affordable when it can be repaid and still allow the customer to pay their other debts, bills and living expenses, without having to borrow again. When someone has had several doorstep loans, this is very often a sign that they are unaffordable.
Morses is currently losing 67% of affordability complaints at the Financial Ombudsman. Here is one recent FOS decision where the Ombudsman decided that loans 3 and 4 were not affordable and Morses should refund the interest on these loans:
Mr J had now been borrowing for 15 months without a break and the amounts he borrowed had generally increased. This, to me, points to a sustained and increasing need for this type of credit.
Morses is facing increasing numbers of complaints from claims companies. In February it said:
The cost base of the HCC division has been impacted in recent days by a rapid increase in claim volumes submitted via claims management companies. Given the scale of these complaints, it is anticipated that costs will increase and impact adjusted profit before tax for the current financial year, ending 26 February 2022.
At the same time, it announced that its Chief Executive, Paul Smith was leaving. As the Investors Chronicle reported:
on Thursday 17 February, Smith committed a fatal error of judgement. Without telling anyone in Morses Club, he sold shares worth almost £200,000.
The company learned about this the following day, and after what must have been a frantic weekend, Morses issued a profit warning: the cost of checking or paying claims, it said, would reduce profits to 20 to 30 per cent below consensus.
Oh, and by the way, Smith had “stepped down with immediate effect”. He wasn’t thanked, which is often the code for being sacked, and the accompanying media release revealed his share sale.
How Morses customers would lose out in a Scheme
Schemes are set up to cap the amount a firm has to pay out to a group of creditors. In this case, the creditors are Morses customers who were given unaffordable loans, as they could claim a refund of the interest they paid.
These harm customers in three ways.
Customers normally only get a percentage of the calculated compensation
Some jargon:
- the amount people get is described as the pence they are paid for every pound they should have had. This is the same as a %. So if you are paid 30p in the £ that means you are getting 30% of your correct refund.
- refunds and compensation are often called redress,
Looking at recent high cost credit Schemes:
- the Money Shop‘s paid a bit over 5p in the £ – after originally saying it expected to pay about 81p in the £;
- Provident’s Scheme is paying 4.25p in the £ – when customers voted, many thought that would get 10%;
- Amigo Scheme in progress says it may pay 41p in the £.
Today’s announcement says Morses is making an additional provision of £45m in its accounts for complaints. This isn’t the amount Morses will put into any Scheme. It is impossible to guess at the moment what percentage any Morses Scheme may pay out.
Many customers don’t hear about the Scheme in time to claim
There is a strict time limit on making a Claim – typically 6 months.
Emails about the Scheme may go to an old email address. Or they may be incorrectly identified as spam so the customer never sees them. Letters may go to an old address.
If someone doesn’t find out in time to claim, there is no way for them to make a complaint. The Financial Ombudsman won’t be able to consider one. And you can’t even go to court. A Scheme changes your legal rights so you literally have no way to claim after the Scheme deadline is reached.
Morses will decide which loans are unaffordable in a Scheme
If Morses only uphold a small number of loans, a borrower may have had more upheld by the Financial Ombudsman.
In a recent complaint, Morses only upheld loans 5-9. The first 4 loans were in order £200, £240, £400 and £700. It’s likely that the Financial Ombudsman would have said that the much larger loan 4 was also unaffordable.
Many people have been left very unhappy with apparently random decisions made by Provident in its Scheme. If they want to appeal, they are asked to produce evidence. Provident failed to explain why loans were rejected so it was difficult for the customer to argue against it.
Where there is repeat lending, the Financial Ombudsman doesn’t normally ask a borrower to produce a lot of evidence. The repeat lending itself shows that the customer has become dependent on the loans. This is frequently the case with doorstep lending such as Provident’s and will also apply to Morses.
Schemes have an appeal process. But Provident made this so difficult and their payout is so low that many people gave up.
What happens to current Morses complaints?
Today’s announcement by Morses says:
The Company has provided the FCA with its proposals and is engaging with them regarding a potential Scheme and its future business model.
Importantly it does not say that Morses has asked the FCA to be able to pause complaint handling while a Scheme is set up – the legal jargon for that is called a moratorium.
With no moratorium in place, Morses will have to carry on assessing complaints and the Financial Ombudsman will carry on taking complaints and deciding them. So current complaints should be OK at the moment.
It sounds as if this Scheme is at a very early stage, and getting it approved may be lengthy:
The Company has also taken steps to appoint an independent Chairperson to set up a Customer Committee to represent eligible customers and assist the Company in developing any potential Scheme. Details of any potential Scheme would be announced in due course. The Scheme would be subject to the approval of the requisite majority of affected customers (i.e. those customers who received loans during the period to be covered by any Scheme) and, thereafter, the Court.
I don’t think the FCA should allow a complaints moratorium for a long period. It would leave customers in limbo, unable to progress valid claims. For Amigo this went on for more than 18 months before a Scheme started.
If you haven’t complained yet, complain now!
If you have had more than a couple of loans from Morses, read How to ask for a refund for doorstep lending. That describes how these complaints work and why your loans may have been unaffordable even if you repaid them all on time.
It also has a free template letter you can use to send in a complaint now. There is no need to use a Claims Company to do this.
Very large numbers of Morses complaints are being upheld. You are likely to get much more if your complaint is upheld before a Scheme rather than waiting until the Scheme starts.
The worse case is that if your complaint is not settled before a Scheme, then it will become a claim in the Scheme. You can’t lose out by complaining now and you may gain a lot.
Can’t pay your bills or debts?
Refunds from credit cards and catalogues
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Michael QUICK says
THey created situation (greed) they pay that is the only right thing to do, no more corrupt judgments against the people, they owe they pay and then some. senction ownets and their property to comply no let outs we pay they pay. end of..
Kim says
Iv contacted morses 3 times and been ignored everytime. I used your template first time but since then just emailed.
Sara (Debt Camel) says
when did you first complain to them?
Mick says
More and more of these companies are treating their customers with complete contempt by doing this. Then being able to walk scot free and able to continue making more money and profits for shareholders. This is a disgrace and the government seems to think this is okay.
Michael QUICK says
The government a complete disgrace and has been since they had high salaries at our expence let alone too many MPs for a small island manipulted to gain votes over the years. – scandal.
Adasleni E Benítez Ramos says
Yes too much interest for pay back
Thanks
Marie says
Hi Sara
I have a complaint in with them at the moment. My deadline date of 8 weeks for the final response is next week.
Is it realistic to believe I will receive the full amount of my redress, if I am successful, taking into consideration that they take 28 days to pay out?
Thanks,
Marie
Sara (Debt Camel) says
At the moment they appear to be carrying on with normal complaint handling. It is certainly possible you could get the full redress. I can’t say how likely this is,
Cammy says
Hi Marie
Did you get any redress? I am in the final week too
Thanks
Chris says
According to their website, Morses are still loaning money as of 20/07/2022.
Timbo says
Is there an email address to send complaints to Morses? Can only find a phone number or postal address. Thanks
Sara (Debt Camel) says
try ricky.essex@morsesclub.com – let me know if it works.
Francis mcd says
My wife and I have had several loans with morses, rolled over. I owe about £150, wife owes about 2-3 grand. Still paying them. Should we stop paying them? Will they go into administration?
Sara (Debt Camel) says
if you have each had several loans, I suggest you both send them an affordability complaint now.
Are the loan repayments affordable for you – that is can you repay and not be left so short you will have to borrow more money, from Morses, or elsewhere, or get behind with bills?
Francismcd says
I’m paying 25 a week off. My wife pays £105 a week. Can afford it ok at min from benefits,but should we stop paying? If they go into administration will we be chased for the money if we dont pay?
Sara (Debt Camel) says
There is no sign at the moment that they will go into administration.
I suggest you both make complaints and see what Morses reply.
£105 is a lot to pay if you are on benefits. With energy bills set to go up purther, That amy well be unaffordable. You must not borrow more money elsewhere to repay Morses. Or egt behind with important bills.
Can I suggest your wife talks to National Debtline on 0808 808 4000 about what she should do? This is in addition to making a complaint, not an alternative to it. It may be she needs to ask for a pyment arrangement with Morses so she can may off the loan at a lower, more affordable rate. If she then wins an affordability complaint, interest is removed and it will be repaid even sooner.
Amy says
I used to work for morses and last year I sent them an affordability complaint had 49 loans in total they sent me all of my loan letters. then there final reponse was basically that it was fraud i had committed and knew what I was doing so that was the end of it. not that I ever issued my own loans of course the pressure of targets and not being paid my manager used to say so I ended up with loads that I couldn’t afford so I have just left it at that all cleared up now thank god absolute terrible company
Mike says
Sara Morse is pausing all redress claims with immediate effect.
Sara (Debt Camel) says
yes, here is their announcement this morning: https://www.londonstockexchange.com/news-article/MCL/update-on-potential-scheme-of-arrangement/15580457
What is not clear yet is whether the Ombudsman will stop handling Morses cases – this may become clear later today or in the next few days.
At the moment my suggestion is that anyone who has made a complaint to Morses and is over the 8 weeks should IMMEDIATELY send it to the Ombudsman. It is possible that the Ombudsman will carry on with cases it already has. We will have to see but there is nothing to lose by send your complaint into them now. Use this form https://help.financial-ombudsman.org.uk/help and don’t delay.
Pol says
Wow, I got lucky. Was meant to be paid out by tomorrow but received it yesterday. Good luck everyone
Ashley Clark says
I have been told that I will receive a response by end of play 15th Aug 2022. Do you think I won’t be paid anything if it is upheld as I read it was only new claims not ones that have already been done
Sara (Debt Camel) says
When did you make the complaint?
Ashley Clark says
Got my reply back today and said they were not upholding so sending to ombudsman.
But had £30 off someone today with ref FSBC then loads of numbers. Don’t know where it has come from
Keely says
My complaint got upheld and I’m currently on day 12 waiting for payment, does this mean there is a chance I will not receive the money?
Sara (Debt Camel) says
There is a chance.
But Morses statement yesterday said “Morses Club has now taken steps to pause the processing of all new redress claims for unaffordable lending with immediate effect.” That doesn’t sound like it means claims currently in progress… let alone ones that have actually been agreed.
Was your complaint upheld by Morses directly, if so how long is it since you complained?
Keely says
Yeah it was with morses directly, complained 6th June final response 1st august, they upheld they upheld 17 loans out of 42 I accepted just incase the went into administration
Sara (Debt Camel) says
did they give a timescale for being paid?
Keely says
They did say up to 28days
Sara (Debt Camel) says
ok well fingers crossed. If you arent paid at that point, send the complaint to the Ombudsman. Who is still taking complaints at the moment.
Jackie says
I put a complaint in on 20th of May, I received a letter to say my complaint was being investigated. I emailed again last week and said if I didn’t hear from them soon I was going to the Ombudsman. I got an email by return to ask to phone them. I phoned and was told my final outcome letter was sent to me on the 19th of July which I never received. The woman said she would get a new copy sent out to me. I received it this morning. I’m quite happy with what they’ve offered although 5 loans weren’t upheld. I’ve posted the form back recorded mail. They should get it back Monday. Do you think I’ll get paid out?
Sara (Debt Camel) says
As this is an offer they have already made, I hope it will be paid promptly.
Jackie says
I phoned this morning to tell them I was accepting the offer. Lady took my details and said payment will be made within 28 days. Will wait and see.
Anonymous says
Hi Sara
Like above I received final offer on 1 aug to which I accepted redress for 17 loans out 35 and was told payment would be up to 28 days.
Because this was accepted before this new statement on suspending new claims should I be right in thinking that my acceptance means they are legally obliged to forful my refund
Sara (Debt Camel) says
I hope your refund will be paid soon and in full.
You do not have a “legal right” to this in every circumstance – if they went into administration you would be unlikely to get a it paid in full.
Anonymous says
I phoned them today to see where stand was told because before 11august at 7 am then everything should progress as settled n be paid as scheduled,so hopefully that happens
Sara (Debt Camel) says
ah. Thanks for that info.