Many people are making affordability complaints about payday loans, asking the lender to refund interest. Most lenders are refusing to look at any refunds for payday loans that were taken out more than six years ago, saying the Financial Ombudsman Service (FOS) will not consider these cases.
But this isn’t correct! This article looks at the current situation and the implications for your complaint if it involves older loans.
The Financial Ombudsman’s time limits
The FOS website explains its rules 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)“.
These are sometimes referred to as the “six plus three rules”. I don’t like that phrase, it can be confusing as it suggests that the 3 years is an extension, giving a maximum of 9 years, but it is actually a separate timescale.
Many early payday loan complaints involving older loans were rejected
Payday loan affordability complaints started to be made in large numbers at the end of 2015. For the early complaints, loans over 6 years were often not considered as being over the 6 year time limit, but a few were allowed.
Customers kept pointing out they had no idea that they could complain before. Many people had had to get debt advice from Citizens Advice or StepChange and the possibly if a refund had never been mentioned to them – so how could they reasonably be expected to have known?
In the summer of 2016, the FOS put all cases involving any loans over six years old on hold, while they decided whether the “three year” part of their rules meant they can look at these older loans.
November 2016 – Ombudsman decides it can look at earlier loans
In November 2016, letters were sent 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 were identical – the FOS had clearly reached an internal policy decision that it was fair to look at the older loans.
Some of the points the letters made were:
- 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.
The lenders were asked if they accepted this
The letter then said:
- 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.
- if you disagree with my conclusions, please let me know, telling me your reasons.
- 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 were getting a chance to object. This is how the FOS works – both sides are told what the adjudicator is thinking and have a right to comment on it.
March 2017 – Payday UK, Payday Express and the Money Shop start to pay out
Four months later, Instant Cash Loans Ltd – the large lender who owns the Payday UK, Payday Express and the Money Shop brands – accepted the Ombudsman’s general approach and started to pay out on older loans. Some of the first few cases included:
- Susan had 14 loans from Payday Express, nine were over six years old. Ombudsman ruled all loans were unaffordable;
- Craig got a full refund on his Payday UK loans from 2008/9;
- the Money Shop accepted Kerry‘s adjudicator’s decision to refund all her cheque loans from 2009-11.
Annoyingly these three lenders are still sometimes trying to fob people off at the initial complaint stage, saying the Ombudsman won’t look at loans that are more than 6 years old even. See What should you do? below.
Other lenders – still being difficult
In Summer 2017, most other lenders are still objecting to the FOS considering these older loans. This includes Wonga and Quick Quid, 2 of the biggest lenders.
At some point this log jam will be resolved – either the lenders will agree to pay out, or the Ombudsman will lose patience and issue Final Decisions, or the Ombudsman will change its mind. I don’t think that last option is likely!
In September 2017, I am currently optimistic that there will be a final decision soon, so don’t make a hasty decision now that you may later regret.
What should you do?
If a lender tells you the Financial Ombudsman won’t look at loans over 6 years old, don’t believe it!
If you only had a few loans and they were all over 6 years, you may decide not to bother, but if you borrowed repeatedly from the same lender for many months then don’t let yourself be put off. Send your case straight to the Ombudsman, the main payday loan refund page explains how to do this.
Don’t expect these cases to be quick, just sit back and wait. There isn’t anything you can do to speed this up!
Ask for older loans to be ignored?
You can ask for the over 6 year loans to be ignored. If you only had a couple of loans over 6 years this could be a sensible move… 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 that were older but lots!
You can always send the full case to the FOS and later ask for the older loans to be dropped. It usually takes 2-3 months for a case to be picked up by an adjudicator, and the situation could have changed in that time!
When did you hear about affordability complaints?
If you have loans over 6 years, you are likely to be asked by your adjudicator (the job title of the person at the FOS who is handling your complaint) how and when you found out about affordability complaints.
There is no magic answer you need to give to this – just say what happened to you. It doesn’t matter if you saw a reference to this page in a Facebook group or another website, or if a friend had heard of someone getting a refund and told you, or you saw a news article about refunds from Cash Genie or another lender etc etc.
If you want to know if there have been any recent developments, this is the page to check on – as soon as I hear anything I will update this article.
This article was first published in November 2016 – it is kept updated.