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.
But this isn’t correct!
UPDATE: new article published in October 2018 on two new important Ombudsman decisions – both saying the FOS can look at older cases.
UPDATE: new article October 2018 QuickQuid appears to be ignoring the latest Ombudsman decisions: QuickQuid – misleading customers about loans over 6 years old.
I am keeping this old article so people can see how this issue has developed. But the newer articles are now more relevant if you have a case involving older payday 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.
Wonga and QuickQuid still holding out
Since this decision, Wonga and QuickQuid have been objecting to the Ombudsman’s decision. In summer 2018 they are 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.
In May 2018, a Debt Camel reader sent the Ombudsman a Freedom of Information request asking questions about how many people had over 6 years cases against QuickQuid on hold. The reply was that no specific figures are kept on these, but there are about 1,500 QuickQuid cases awaiting a jurisdiction decision by the Ombudsman and the oldest of those cases was 25 months old.
Jurisdiction issues are not common and are normally resolved reasonably quickly. So my guess is that probably 1,400 or more of those 1,500 cases are related to the 6 year rule.
Wonga – now in administration
With Wonga going into administration in August 2018, it is unclear what will happen to the complaints against Wonga currently with the Ombudsman, including the over 6 year cases. See Wonga – refunds after administration for the latest news.
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, the main payday loan refund page explains how to do this.
October 2018 – two new published decisions
FOS has now published two decisions that go into detail (20 and 26 pages!) considering all the arguments in a couple of cases. The good news is that FOS has decided in both cases that the customers are complaining within three years and that it has jurisdiction to look at their cases. See my new article Ombudsman decisions on payday loans over 6 years old for details of this.
Last update: October 2018.