Some payday lenders are responding to some complaints asking for refunds of interest by saying you misrepresented or lied about your income or expenses when you took out the loans. Every case is different, but here are some things people say.
“I didn’t know what to put down”
I often give Income & Expenditure (I&E) sheets to trainee CAB advisers and ask them to complete one in ten minutes. After doing this, they realise it isn’t as easy as it sounds! It’s common for people to:
- forget annual expenses and variable costs (car costs, Christmas, school uniforms, school trips etc);
- not be sure what to do if they pay some expenses and their partner pay others;
- have little idea what they spend on food and other supermarket items;
- not know what to do if they are on zero hours contracts or have variable self-employed income.
When I say “So that suggests you have £450 left to save at the end of the month”, the trainee usually laughs and says they don’t have anything spare.
Almost always people miss things off or underestimate expenses. But some payday lenders seem to assume they can safely lend £250 if the customer’s I&E shows £450 spare.
You may have put in a higher income hoping to get more hours at work. You may have missed off debt repayments because you knew wouldn’t be able to afford them.
People don’t put down large amounts for cigarettes, alcohol, drugs or gambling. Partly because they think they would be refused a loan but sometimes because they hope that next month things won’t be so bad.
If you had mental health problems, you may not have been able to clearly think about your finances and you may just have put down some numbers quickly without much thought.
Or you may simply have filled out the application without much thought. Some lenders pride themselves on this – one firm boasts Most people will complete our application form in around 2 minutes from start to finish. – no warnings that you should take your time and consider the figures.
“Not asked about most expenses”
Sometimes lenders ask very little about your expenses. This is most common for loans before 2015.
This can make it hard for you to give accurate numbers as you may not think of things such as clothes or car servicing costs which don’t happen every month if you are asked to give a figure for your regular financial commitments. See this case where the Ombudsman says:
Before loans three and four, MYJAR should’ve asked Mr S for not only his normal monthly income but also his normal monthly living costs – not just his housing costs – and other regular financial commitments. Before loans five to fourteen, MYJAR should’ve carried out a full review of Mr S’s finances.
“I didn’t list other payday loans”
One common situation is that when someone is asked on an application to list their other debt payments, you may have left payday loans off as you thought you were being asked about regular monthly payments, such as a bank loan.
For an example, see this Ombudsman decision about a QuickQuid loan:
QuickQuid says it asked Mr B about his other payday loans as part of the application process. But as far as I can see from the relevant screenshot, the examples of what should be included in “Monthly Credit Commitments” are enclosed within a drop down menu. I also think that there’s a difference between a credit commitment that’s due to be paid each month and a payday loan which is usually a one-off commitment.
So the Ombudsman agrees that someone completing the application may not have realised they should have listed payday loans.
Here is another example: an Ombudsman decision about a Myjar loan:
I appreciate that MYJAR asked Ms B about her monthly credit repayments, but I agree with the adjudicator that the question wasn’t sufficiently clear for her to have realised that she also needed to provide information about her short term lending as well as her long term credit repayments.
“I never updated my details when my circumstances changed”
You may have given pretty accurate figures when you first borrowed, but not gone back and changed them if your income dropped or your expenses went up.
For some people this will have been because they never thought about it and didn’t really focus on those parts of the new application. It can be very easy if you are stressed or in a hurry to just tick boxes without paying much attention if you are going back to a lender you have used before.
Other people will have realised but just felt too worried that they could be refused a loan. But if you were continuing to borrow, when your income and expenses suggested you shouldn’t be in financial problems all the time, the lender should have realised that for whatever reason, there was something wrong with the details they had. A responsible lender would either have stopped lending at that point or looked more closely at your credit record or asked for other evidence such as your bank statements.
Yes, you should have told the lender about the change in your circumstances. But the lender has a responsibility to check when something looks wrong.
“I never said that”
Sometimes people are astonished at the very high income the lender has recorded them as saying. This may be because your £1,500 monthly income has been recorded as weekly. It could be an error by the lender or by you. But if it was an error by you, the lender should have wondered why someone earning £6,000 in a month needed to take out a payday loan at all!
If you were never asked for expense details and you may have no idea where the lender got the figures from.
Sometimes people applied for a loan online but were then phoned up by the lender who talked through details and may have changed some figures. But the customer was never sent the new figures.
For applications in a shop, some existing customers have said they were given a completed form to sign to get the money – they weren’t asked if anything had changed.
If anything like this happened, put it in your complaint to the Ombudsman.
“The lender should have asked for bank statements”
Lenders are only obliged to do “proportionate” checks on affordability. A mortgage lender asks for bank statements but payday loans are much smaller.
The Ombudsman isn’t going to say that a payday lender should have asked to see your bank statements before lending to you the first time.
But if you kept borrowing then the lender should have made better checks. if your loans were going up or if there was only a short gap between the loans or if you needed top-ups, they should all have suggested that at some point the lender should have looked more closely at your situation.
“I was just desperate – the lender should have realised the figures were wrong”
The Regulator’s rules say that a firm shouldn’t give a loan if they know or should suspect that the customer hasn’t been truthful when applying for the loan.
So when should the payday lender have reasonably suspected that your I&E information was inaccurate? Whether because you had lied or because you forgot some expenses? Or that you were in a DMP or an IVA? This depends on what else the lender knew.
If your lender credit checked you, they should have taken that into account. So if your credit account showed defaults, arrangements to pay or other problems this doesn’t seem compatible with an I&E that showed you had a lot of spare income and you can argue the lender should have suspected your I&E was not correct.
The most important information every lender will have had was your borrowing history from them. The first time you borrowed there wouldn’t have been anything and even for the second loan there wouldn’t have been much (unless you had rolled the first loan a lot or had late payments of course). So the lender would reasonably make the decision to lend based on the figures you gave in your loan application.
But for later loans, the lender will know more and should consider that in deciding whether to lend again. Your I&E may show a lot of spare income but if you are rolling loans or borrowing every month, that suggests you are becoming dependent on these loans. And that suggests there is something wrong with an I&E if it shows a lot of spare income.
If your I&E varied a lot, this should also have been a warning flag to the lender that perhaps there was something wrong with the figures. Here is an Ombudsman’s comment in this sort of situation:
However, when Mrs D applied for her fourth loan, I don’t think Wonga should have relied on the expenditure figures provided by Mrs D… Although it appears affordable, Mrs D was saying her only expenditure was on food (£50) and utilities (£100). This compares with her first loan application when she also had expenditure on rent (£200) and credit (£100). Indeed £50 on food per month for herself and two dependants also seems unlikely.
As a generalisation, if the income or expenditure details on your loan application weren’t right, the payday lender can’t be blamed for giving you the first couple of loans.
But if you carried on borrowing, the lender should have considered if the I&E figures were wrong. So if you borrowing repeatedly, suggesting you were dependent on these loans, you may still win the affordability complaint if you go to the Ombudsman.
Background on Relevant rules
You don’t need to be able to quote the regulator’s rules when you are putting in a complaint to the Ombudsman – it’s better to just use plain English!
But payday lenders can make their rejection letters look as though they are right and you may as well give up. So I thought knowing the rules may re-assure you that the Ombudsman won’t dismiss your complaint if your application was not accurate.
FCA CONC Rules say:
5.2A.36 A firm must not accept an application for credit under a regulated credit agreement where the firm knows or has reasonable cause to suspect that the customer has not been truthful in completing the application in relation to information relevant to the creditworthiness assessment.
(In November 2018 that replaced the almost identical previous provision in 5.3.7. which applied from April 2014.)
Before April 2014 payday lenders were regulated by the OFT which had a similar provision: under Unsatisfactory Business Practices is:
4.31 Accepting an application for credit under circumstances in which it is known, or reasonably ought to be suspected, that the borrower has not been truthful in completing the application for credit with regards to the information supplied relevant to inform an assessment of affordability.)