UPDATE: new article published in October 2018 on two new important Ombudsman decisions – both saying the FOS can look at older cases.
I am keeping this old article so people can see how this issue has developed.
Many people are making affordability complaints about payday loans, asking the lender to refund interest. In 2016 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.
This isn’t correct!
FOS explains its time limit 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”.
Payday loan affordability complaints started to be made in 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.
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.
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’s name].
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 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.
Which is exactly what I think.
The lenders were asked if they accepted this. 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.
In March 2017, Instant Cash Loans Ltd – 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. 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.
Since this decision, Wonga and QuickQuid have been objecting to the Ombudsman’s decision. In summer 2018 they were still arguing over a few test cases. Until these are agreed, all other cases with loans over 6 years with these two lenders are on hold – that is several thousand cases.
If a lender tells you FOS 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.
October 2018 – two new published FOS decisions
See my new article Ombudsman decisions on payday loans over 6 years old for details.
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