In January 2018, Payday UK has written letters to thousands of people saying that an incorrect search was made on their credit record between August and November 2016.
The Financial Conduct Authority (FCA), who regulates payday lenders, has made them write to everyone affected and offer £75 as compensation.
Here is an extract from the letter one reader receive:
This isn’t a scam
Some people getting the letters have never been a Payday UK customer, indeed they have never had a payday loan, so their first thought is that this is some kind of scam. But it isn’t.
Payday UK hasn’t explained why they made these searches on people, some of whom weren’t even their customers, but you can call the FCA (or 0300 500 8082) or Payday UK (0330 024 1642) up and they will confirm this letter is genuine.
Who was affected?
In summer 2016, several people who were making affordability complaints to Payday UK, Payday Express and the Money Shop said that they had found “hard searches” on their credit records which had damaged their credit score. At the time a few people complained and had the searches removed.
I am informed by Payday UK that the erroneous credit searches were not left as a part of affordability complaint handling, but they haven’t explained how the problems did occur. Or how they got hold of the details of people who had never applied for any payday loan.
NB if you have had payday loans, and don’t know what an affordability complaint is, read How to ask for a payday loan refund which explains who can get a refund. You could get a lot more than £75 back! The £75 compensation offered in this letter is in addition to any refund you might get for an affordability/irresponsible lending complaint.
What is a “hard footprint”?
A lender can check your credit record for various reasons, for example to confirm your identity or assess whether you can afford a loan you are applying for. Some searches are “soft” – although you can see them, other lenders can’t and they therefore can’t impact your ability to obtain credit.
But a “hard” search is visible to other lenders and so it can affect you. Experian says:
Lenders use previous searches because certain patterns can, along with other information, indicate high-risk. For example, a lot of credit applications in a short space of time can signal someone applying for more credit than they can afford. It could also be a sign of fraud.
Is £75 reasonable compensation?
The incorrect searches were deleted in November 2016, so they wouldn’t have affected your credit record for long. And a single search would not be regarded as a problem by most lenders anyway. £75 seems like a reasonable amount to me.
Of course if you were refused credit during this August-November 2016 period and you feel this incorrect hard footprint on your credit file may have been the reason, you may feel £75 is inadequate.
Update – the £75 is slow to arrive!
In February 2018 there are lots of reports in the comments below this article that after three or four weeks the money still hasn’t been paid.