The Administrators for Casheuronet LLC (CEU) have published their Proposals for how the administration should be handled.
CEU went into administration on 25 October 2019. CEU is better known by its brand names: QuickQuid, Pounds To Pocket and Onstride, all major UK payday lenders.
If you have a complaint against one of these payday lenders you may have been sent a copy of these Proposals and you are being asked if you want to vote on some matters.
This article summarises the Proposals and the Voting, concentrating on the issues most relevant to payday loan borrowers.
Here I will just refer to QuickQuid for convenience – but this includes loans from the other two smaller brands.
Background – how to divide up the pie…
For people who aren’t familiar with company insolvency, here is my very simplified overview of what administrators have to do.
The role of Administrators is to divide the available money between a firm’s creditors – the people the firm owes money to.
Some creditors take priority. This includes secured creditors (QuickQuid doesn’t have any) and employees who are owed wages. They get the full amount they are owed and are paid first.
The rest of the money is divided up between the other creditors, called the unsecured creditors – think of this money as being a pie.
The Administrators job is to :
- make the pie as big as possible, by selling assets for as much as they can; and
- divide the pie fairly between the unsecured creditors.
If Quickquid or one of the other brands gave you an unaffordable loan, you will be an unsecured creditor.
The costs of administration will reduce the money available, making the pie smaller. So it’s important that these are minimised.
They won’t know how many unsecured creditors there are and how much they are owed until each complaint has been decided.
The Administrators don’t actually care how large the refunds determined are, or how many customers get them, they just want a fair process. So there is no reason for the Administrators to try to make the refund decisions as low as possible.
Why did QuickQuid go into administration?
In 2.2 Factors leading to Financial Distress, the Administrators summarise why QuickQuid went into administration.
Complaints about unaffordable lending were at a low level in 2015 and 2016, but started to rise from 2017 onwards, with more than 3,000 complaints a month being received in some months.
QuickQuid had originally based its estimates of the amount it might have to pay to borrowers who had been given unaffordable loans on the assumption that claims could only be made going back six years. But the FOS decision in August 2018 that it could look at earlier loans, resulted in a significantly higher level of possible payouts because QuickQuid had been a major lender for such a long while.
This, plus the reduction in interest that it could charge following the FCA’s cap on interest and charges at the start of 2015, meant QuickQuid needed financial support from its US parent, Enova.
The ongoing business was profitable if the “legacy liability” for affordability complaints could be limited. To try to do this, QuickQuid proposed a Scheme of Arrangement to the FCA in October 2019. But the FCA would not say it would not object to this. Enova then decided it could not continue to support the UK business which went into administration.
For years QuickQuid seems to have been operating on the basis that it could win many cases at FOS despite the number of cases it was losing in practice. These included not just the over 6 year loan cases, but the Pounds to Pocket flexi loans, and loans given after 2015.
Loans which haven’t yet been repaid
There are a very large number of QuickQuid loans outstanding – 498,000 borrowers at the start of the administration, with a total value of £300million, an average of about £600 per loan;
Most of these loans were already in default:
- only about ten per cent of these loans (£28 million) were not in any arrears;
- about two thirds were in arrears by more than a year.
The administrators say:
Due to the short-term nature of the loan book, the initial strategy has been to maintain existing collection systems while we consider all options for maximising value for the … loan book.
By 1 December 2019, £13.4million had been collected. A large part of that will have been from the loans that were not in arrears.
The administrators are considering selling the loan book to a debt collector.
- The sale of the loan book may be complicated as a significant number of customers may potentially have good affordability complaints. In the Wonga administration, the administrators gave up on the idea of selling the loan book.
- If the loans are sold to a debt collector this may be for a low amount of money because so many of the loans are already in arrears and may not be recoverable.
- So far as I know, people who have complained and who currently owe a balance are being asked to repay it. That is an unfair way to treat a group of potential unsecured creditors as anyone with a successful complaint would have the right to set off the refund against the balance.
How affordability complaints will be decided and refunds estimated
The proposals refer to customers who think they were given an unaffordable loan as redress creditors.
The Administrators are unable at this time to forecast the likely volume of Redress Creditors and the total estimated value of these claims, albeit it is expected that Redress creditors will ultimately contribute a significant number of the unsecured creditors.
Outstanding complaint numbers:
- at the start of administration there were 14,000 complaints yet to be decided;
- this includes 5,400 complaints that were with FOS which have now been returned to the administrators to assess;
- there were also 1,000 complaints which had been upheld but where the calculated refund had not been paid. received.
An online portal is being developed to allow customers to submit complaints.
This is unlikely to go live before the second quarter of 2020.
If you have already had a complaint decided by the firm directly or by a FOS decision having been accepted by the firm, you won’t have to submit a Claim.
The portal will be a very easy page for people to register a complaint – you won’t have to give details of your loans or explain why they were unaffordable. There is no benefit in using a Claim Company to do this for you.
A tool to assess complaints is also being developed:
The Administrators’ intention is for the adjudication tool to automatically adjudicate claims and be aligned as closely as possible to methodologies considered by FOS.
The costs of the Administrators undertaking a wholly manual review of each claim would likely result in little to no funds being available for distribution to any unsecured creditors of the administration, so an automated process is critical to generate value for creditors.
- It is surprising that as QuickQuid proposed a Scheme of Arrangement to the FCA to cap its payments to complaints, there is no reference in the Proposals to the expected total of complaints, which must surely have been given to the FCA. It may be the Administrators don’t think that number was accurate, but that is my speculation.
- The Wonga administrators decided to accept complaints about loans over 6 years old and I expect the QuickQuid administrators will do the same.
- The automated tool will probably be very similar to the one used in the Wonga administration.
- You may feel that an automated tool for assessing complaints means yours won’t be considered in detail. But this is inevitable – there is no point in a complex process that will cost so much that there is no money left to pay you anything.
- You may feel you should still be able to go to the Ombudsman. But this would be lengthy and cost too much. FOS cannot legally handle these complaints.
Encouraging more complaints
The Administrators need to encourage people who may have a good complaint against QuickQuid to come forward. This is part of their legal duty to try to locate all creditors of the firm.
The Administrators will be communicating with potential Redress Creditors in the coming months to explain how they are able to submit claims…
The Administrators will also undertake a national advertising campaign to alert all possible Redress creditors who may have changed contact details since they last engaged with the Company.
- You may have a good affordability compliant even if you repaid all your loans on time. The more loans or rollovers you had, the longer the time you were borrowing for and the larger the loans, the stronger a complaint is.
- If you have been borrowed from QuickQuid or one of the other brands, you are likely to get emails. These may go into your spam/junk folder, so you check that if other people seem to have received an update.
How much money are you likely to get and when?
Back to that pie … The amount of money you will get depends on how large the pie is and your share of it.
Your share of the pie depends on the size of the refund that is calulated for you if the lender hadn’t gone bust and on how much all the other unsecured creditors are owed.
There will be some business creditors but for QuickQuid most of the creditors will be people like you who are owed a refund.
The Administrators have said in these Proposals:
It is anticipated the dividend payment to unsecured creditors will be significantly less than the admitted claim value.
So there won’t be enough money to pay everyone in full. You will only get a percentage. You may hear this called getting some number of pennies in the £.
But they won’t know how large the pie is for a long while until all the assets are realised and all the complaints have been evaluated. For QuickQuid the assets are mostly the loan book, see above.
- My guess is that it won’t be known until the third or fourth quarter of 2020 what percentage people will be paid.
- This is likely to be announced just before it is paid.
Voting – all creditors can vote
If you have received the email with the Proposals, the Administrators are asking you to vote on four resolutions:
- whether to form a creditors’ committee;
- to approve the Proposals;
- to fix the basis that the Administrators are paid on;
- to agree that the Administrators’ expenses will be reimbursed.
A Voting Form and a Proof of Debt form are provided.
If you want to vote, the Voting Form and the Proof of Debt form need to be returned by 2 January 2020 as the Proposals explain. You don’t have to vote on the resolutions – you can ignore them if you want to.
If you want to know more about creditors’ committees, read this R3 Guide.
I can’t advise you on how to vote. For what it’s worth, here are my thoughts.
- You may not like the time this will take, the fact you won’t get paid the full amount of your refund or the use of an automated tool. But I can’t think of an alternative to the Proposals given the way administration have to be conducted.
- The proposed administrator fees and expenses may sound high to you but they are standard.
- So I take the practical view that voting against the proposals or the fees will not mean there is any more money available to be distributed to you.
If you decide you want to vote, read this which described how to complete the Proof of Debt form for Wonga. The form for QuickQuid is exactly the same.
My conclusion – broadly the same as Wonga
These proposals are what I expected.
If you are familiar with how the Wonga administration has gone, it looks as though the QuickQuid administration is likely to follow much the same course. That was to be expected as the two companies were both big UK payday lenders, were both brought down by the cost of settling affordability complaint and one of the Wonga administrators has been appointed as a QuickQuid administrator.
But there is no reason why the QuickQuid eventual payout should be similar to the Wonga payout as the assets and numbers of customers of the two firms are completely different.
The Wonga administrators said in their Proposals that the administration was likely to take more than a year. The QuickQuid administrators have not said this.
Wonga had secured creditors and foreign assets that had to be sold. QuickQuid does not. This may make it simpler to complete the administration and slightly quicker to pay people, but the large part of the delay will be to enable complaints to be submitted and assessed.
I have concerns about customers with current loans who are being asked to repay these despite having made a complaint about irresponsible lending. I think any sales of the loan book should be postponed until after all complaints have been determined.
The best place for questions is in the comments below the main QuickQuid page. That page will be kept updated.