Many people are making affordability complaints about payday loans, asking the lender to refund interest. Until now, lenders have refused to look at any refunds for payday loans that were taken out more than six years ago, saying the Financial Ombudsman will not consider these cases.
Earlier this year there seemed to be some inconsistent decisions from the Ombudsman as to whether their rules would permit them to look at the older loans.
Its website explains the time limits as follows:
“six years from the event the consumer is complaining about (or – if later – three years from when the consumer knew, or could reasonably have known, they had cause to complain)“.
In the summer the Ombudsman put many cases involving any loans over six years old on hold, while they decided whether the “three year” part of their rules means they can look at these older loans.
FOS decides it can look at earlier loans
Now, in November 2016, adjudicators are sending letters to the lenders in some of these cases saying:
Having thought about this case in more depth, I think we’re able to look at all the loans given to [borrower].
The letters I have seen are identical. They are sent by different adjudicators to different lenders and the descriptions of the borrower’s case is obviously different, but the main wording is the same.
The points the adjudicator makes about the FOS rules in relation to this complaint are as follows (I am summarising a long letter):
- the borrower would have known that they were in difficulty when they borrowed and may have realised the loans were unaffordable when they were taken out or soon afterwards;
- that doesn’t mean the borrower would have known the lender did something wrong in lending this money. It’s more likely the borrower would have thought they were responsible themselves for taking out these unaffordable loans. But the complaint is that the lender would have known the borrower couldn’t pay these loans back if they had complied with certain lending requirements eg the requirement to lend responsibly.
- if the borrower didn’t realise the lender had done something wrong then he wouldn’t have had cause to complain about it.
- nothing in this case has suggested the borrower was aware, or should really have been aware, they had reason to complain about the fairness of the lending at the time of the loans, or more than three years before the complaint.
- from what the borrower has said, the first time they had reason to complain was [date] when [description of how the borrower found out that the lender should have made affordability checks].
- so as far as [the adjudicator] can see, although the borrower has complained about some of these loans more than six years after they were taken out, all of the loans are within the three year part of the time limit.
Which is exactly what I think.
Lender is asked to reply
The letter then says:
- if you agree with my conclusion and are prepared to look at the borrower’s complaint about all the loans they had, I’d be grateful if you’d let me know by [two weeks after the date on the letter.] Please can you also provide any documentation or further evidence that you’ve not already provided, which is relevant to looking at whether these loans were properly lent.
- if you disagree with my conclusions, please let me know by the same date, telling me your reasons. Let me know now if you plan to reply fully but do not think you will be able to meet this deadline.
- you will also have the right to ask an ombudsman to review the opinion that we can look at the borrower’s complaint about all the loans.
So the lenders are getting a chance to object. Some people who have had their cases on hold for months may think this should all be speeded up, feeling that some of the lenders will just look for any excuse to drag things out for another few months. But this is how the Ombudsman service works – both sides are told what the adjudicator is thinking and have a right to comment on it.
Does this apply to all cases on hold because of older loans?
It seems that the Ombudsman has now reached a general decision about how it will typically apply its rules (which are sometimes confusingly referred to as “six plus three”, I don’t think that is a helpful description) to older payday loans. But this may not apply to every case – there could be some specific features in a complaint that means the general approach isn’t right. I don’t know if these letters are being sent to every lender where a case has been on hold.
The adjudicators in some cases may need to get in touch with the borrower and ask them how and when they found out about the possibility of an affordability complaint. If you are asked this, it doesn’t matter if you saw a reference to this page in a Facebook group or on MoneySavingExpert, or if a friend or relative had heard of someone getting a refund, or you saw a news article about refunds from Cash Genie and googled the subject, etc etc. There are no right or wrong answers here, just say what happened.
If your case is on hold and you haven’t yet heard from your adjudicator, I suggest you get in contact and ask what is happening.
If most of your borowing is under 6 years, you may want to ask for the over 6 year loans to be ignored. This will speed things up a bit, but make sure you have a list of your loans before you do this as you won’t be able to change your mind later if you find out it wasn’t just a couple of loans but lots!
Some special situations
“The FOS already said they wouldn’t look at my earlier loans”
I don’t know what can be done in these cases. As there was effectively no decision on the older loans, it could be argued that they should be handled as a new complaint.
If there were only a few older loans, you may feel it’s not worth bothering with as you had a fair decision. But if the older loans were a significant part of your case, I suggest you contact your adjudicator and ask what you should do.
“I didn’t go to the Ombudsman because I was told they wouldn’t look at these loans”
If you were told by a lender that all or almost all of your loans were too old to be considered by the Ombudsman, you should put in a complaint to the Ombudsman as soon as possible. Even if you are now outside the 6 month time limit to take a case to the FOS after getting a decision from a lender, it’s worth doing this as you may have been misled by the lender.
“I only asked the Ombudsman to look at the recent loans”
If a lender told you the Ombudsman would only look at your loans that were less than 6 years old and so you only complained about these, contact your adjudicator and ask if you can put in a new complaint about the older loans.
Have you had a different letter?
If your case has been on hold and different letters has been sent, could you comment about this below? That would help other people who might be in the same situation.
For full details about what an affordability complaint is, see How to get a payday loan refund, which has a template letter you can use.
UPDATE 17th March 2017 So, four months later, we are at last starting to see some payouts for older loan cases. In the last few days:
- two Payday Express cases, including Susan’s who had 14 loans, nine were over six years old. Ombudsman ruled all loans were unaffordable;
- two Payday UK cases: Craig got a full refund on his loans from 2008/9 and sw a full refund for his loans from 2009/10;
- Katie was surprised to get offered a full refund on all her cheque borrowing back to 2007 from the Money Shop before the case was sent to the Ombudsman. And the Money Shop have accepted Kerry’s adjudcator’s decision to award a full refund for all cheque loans from 2009-11.