UPDATE – Morses Club went into administration on 17 November 2023. This scheme has now been terminated. See Morses Club goes under – in administration – Scheme fails for details and what customers should do.
Morses sent out a batch of decisions on 6 July 2023. Many people have found these confusing – see the comments below this article.
At one point the email says in a grey box:
“Morses Club currently estimate that under the terms of the Scheme, you will receive approximately 20% of this amount and that this will be paid to you in the fourth quarter of 2024.”
Further down it says in normal text on white:
What you need to do now
We will pay any refunds due to you electronically to your bank account, within 30 days of this notice.
So many wanted to know which is right – are they being paid now, or in more than a years time?
Morses has now clarified that the refunds that are being paid in the next month are to a limited number of customers where:
- they have a current loan
- their claim has been upheld
- the redress (legal-speak for compensation) for the loans is greater than the remaining balance
- the customer has made payments after 30 May 2023
- it is these recent payments only that are being refunded now, NOT the cash element of the compensation – that will be paid towards the end of 2024.
Morses Club plc [“Morses”] proposed a Scheme of Arrangement in December 2022. This Scheme has now been approved by the Court and started on 30 May 2023.
Customers now need to make claims to the Scheme before the deadline on 30 November 2023. UPDATE – it is no longer possible to make a claim
Background to the Scheme
What is unaffordable lending?
A lender has to check that a loan is affordable for the borrower before giving the loan. The Ombudsman has listed the points it looks at when considering an affordability complaint.
A simple summary is:
it has to appear likely at the point a loan is given that you will be able to repay it on time, without being left so short of money that you have to borrow more or get behind with bills. So a loan that was paid on time may still have been unaffordable if paying off Morses meant that you had to take another loan from Morses or another lender or your credit card or overdraft increased.
An affordability complaint is sometimes called an irresponsible lending complaint.
Morses financial problems
Morses faces three main financial problems.
First, it has been paying out increasing large amounts in affordability complaints. Doorstep lending has often involved customers taking out a series of loans as the high interest leaves them unable to manage without more credit. So a lot of these cases were unaffordable and Morses, like other doorstep lenders, failed to make adequate checks.
The Financial Ombudsman (FOS) was upholding 57% of complaints against Morses in the first half of 2022.
A Morses review has identified a potential gross redress owed to customers of £112m. It is working on the basis that only 40% of this would be claimed in a Scheme.
Secondly, its revenue, loan book and the number of customers have all been falling this year as it has tightened its lending criteria. It describes its operations as being constrained by the shrinking borrower base. This applies to Dot Dot loans as well as doorstep lending.
Thirdly, Morses current funding ends in March 2023. It says:
as the current funding facility is in place for less than 6 months following the date of signing the Financial Statements, there is material uncertainty in relation to going concern regarding secured funding.
The Scheme details
What is NOT included in the Scheme
The proposed Scheme does NOT cover:
- any doorstep lending complaints which are not about unaffordable lending;
- any doorstep lending affordability complaints about loans after 2 August 2022;
These excluded complaints will continue to be handled in the normal way. Take one of these complaints first to Morses (email firstname.lastname@example.org) and send the complaint to the Financial Ombudsman (FOS) if Morses rejects it.
The Scheme also does not cover lending by Dot Dot loans, Morses payday lender brand. If you have had one of these payday loans and want to complain, read Ask for a payday loan refund which has a template letter to use.
Comparison with other similar schemes
The main difference with the Provident Scheme is that Provident was closing its doorstep lending operation, but Morses hopes to carry on lending.
The Morses Scheme follows broadly the same path as the Amigo Scheme, requiring investors to contribute through an equity raise.
Morses Club Scheme timetable
- 7 March 2023 – Court Convening hearing – this approved the voting arrangements.
- April 2023 – Customers voted on whether they want the Scheme to proceed.
- May 2023 – Court Sanction hearing – this approved the Scheme, so it has now started.
- 30 May – 30 November 2023 – customers have 6 months to submit a claim to the Scheme.
- 2024 – refunds expected to be paid. UPDATE – this will no longer happen as part of the Scheme
What happens after you have made a Claim
Morses will decide whether to uphold your Claim. You will get an email saying that your Outcome Statement is ready. You can access it through your Portal Account.
I think it’s worth checking your Portal Account every month to see if there is an update there. If your claim is rejected you can appeal this, but there will be a time limit. So don’t forget to keep looking for this.
What refund may you get?
If an affordability complaint is upheld in the Scheme, the compensation (called “redress”) is calculated:
- for upheld loans that have been repaid, the redress is the interest paid;
- for outstanding upheld loans, interest is removed so the borrower only has to repay in total the amount they borrowed. This may mean a lower balance is owed or that the loan cleared and a cash refund is due.
Where your balance is being reduced or cleared, this will be paid “in full”.
But where a cash refund is calculated, you will not receive that amount. The amount you will get will depend on the total cash refunds calculated and the amount of money in the Scheme to be distributed.
Morses currently expects that customers will be paid about 20% of the calculated cash refund.
This is a very uncertain estimate. It depends on how many people make a claim to the Scheme.
It also depends on how many of the claims are upheld and how many of the loans in each claim are upheld. If you had 7 loans there will be a large difference in your refund if five are upheld or only one.
Morses will removing loans that it has decided are unaffordable from your credit record.
Should you carry on paying Morses for a current loan?
You are still legally liable for the loan – Morses proposing a Scheme does not affect that, nor does this change if you make a complaint.
Morses are hoping to begin deciding claims in batches and if your balance will be reduced, this will not have to wait for the point where cash is distributed.
However it may be 6-12 months before your claim is decided in the Scheme. That is a long while to have to carry on making payments to a loan which may eventually be decided to be unaffordable…
If you are currently struggling to pay Morses, perhaps being behind with priority bills or having to borrow more on credit cards or catalogues, then carrying on paying Morses for a loan that may be decided to be unaffordable is not a good idea.
In general, it is probably better for most people having difficulty paying Morses to stop paying or offer a low affordable payment. This will harm your credit record but if you later win the claim, that negative mark will be removed from your credit record.
If you default on other debts or don’t pay important bills or borrow elsewhere in order to pay Morses, you are liable to be in a much worse position even if your Morses claim is eventually upheld.
To get specific advice on your case, I suggest you talk to National Debtline on 0808 808 4000, or visit your local Citizens Advice if you have problems with priority debts and bills.