Contents
Summary of the administration
Curo Transatlantic Limited (Curo) had two UK lending brands:
- Wageday Advance (WDA), a mid-sized payday lender; and
- Juo Loans, a small guarantor lender.
Curo entered administration on 26 February 2019 because of the number of payday loan affordability complaints they were receiving. They appointed KPMG as Administrators.
- The Administrators published Proposals for the administration in March.
- Outstanding loans, less any compensation calculated, were sold to Shelby or Lantern.
- The Administrators used a Claims Calculator to decide which WDA customers may be owed compensation for inappropriate lending;
- 256,000 customers owed compensation were sent emails inviting them to submit a pre-completed Claim. The deadline for Claims to be submitted has now passed.
- It was announced that c.100,000 claims were received and that the administrators expect to pay c. 5p in the pound to customers who made a claim.
- On 20 May 2020 the final dividend of 5.68p in the £ was announced and paid to unsecured creditors. The total amount being distributed was £7,232,445.
Problems after the administration:
- if you are contacted by a debt collector about a very old WDA loan you do not recall owing money on, I suggest you reply saying you were unaware that any balance was owed on any of your Wageday Advance Loans, you dispute this. If it is very unlikely you have made a payment to it in the last 6 years, add that in any case the debt must be over 6 years old and statute barred. National Debtline have a template for statute barred debt you could use as the basis for your reply – talk to them on 0808 808 4000 about this.
- if you have a problem with your credit record showing a WDA loan where the details are wrong ( eg payments, the default date or the settlement date) ask the CRAs to “suppress” the record as it is not possible to get it corrected. This does not apply where the debt was sold to a debt collector.
Background to the administration
The following statements were on WDA’s website in January 2012:
It doesn’t sound as though they were very careful about checking if people could afford their loans. Wageday Advance saw no credit checks as being a selling point for their customers:
Like all UK payday lenders, WDA was forced to reduce its interest rates, restrict roll-overs and make improvements to its affordability checking after the FCA introduced the payday loan price cap in 2015.
But FOS decisions show that WDA continued to make some poor lending decisions. Here are a couple of examples picked at random, they are not isolated cases:
- Miss W borrowed eight times from WDA between 2016 and 2017. The Ombudsman decided WDA must refund the interest on the last six loans.
- Miss T had 14 loans from November 2015 to December 2016. By the 5th loan, WDA should have considered that Miss T may have been dependent on the loans and performed a full financial check which would have found a significant amount of gambling.
The refunds being paid evidently alarmed Curo, its US parent. In June 2018 WDA asked KPMG to look at a Scheme of Arrangement (“Plan A”), which would cap its liabilities for historic complaints. At this point, WDA was already struggling with affordability complaints – the cost of refunds, the administrative overhead and the FOS fees.
From June-September 2018 affordability complaints increased significantly, with 16,000 being received during the four months.
In October WDA asked KPMG to also look at the alternative of a sale of the business (“Plan B”). CTL’s parent company, the American subprime lender Curo, said:
we do not believe that, given the scale of our U.K. operations, we can sustain claims at this level and may not be able to continue viable U.K. business operations without action by the U.K. business to reduce the risk of claims relating to historic lending.
In the autumn, WDA stopped responding to customer complaints within the allowed 8 weeks. Many customers did not receive a response for 16, 20 or more weeks.
As part of the planning, a Claims Calculator was developed to assess all previous lending. This estimated that the total potential liability for affordability complaints could be as much as £223m.
In January 2019, Curo announced it had asked the FCA to say whether it would object to a Scheme of Arrangement which would cap CTL’s liabilities to pay refunds for unaffordable lending at c £18 million. The Administrators admit that:
redress creditors would … have faced a very significant shortfall against the value of their claims in the Scheme.
It is hard to imagine why the FCA might have thought this was a reasonable offer.
On 19 February, the FCA said it needed further information about the proposed Scheme. At that point, CTL decided it was unlikely to get Plan A approved. It decided to appoint administrators and proceed with Plan B. At this time it stopped offering loans through the Wageday Advance website.
Loan sales to Shelby and Lantern
Immediately on administration – some accounts sold to Shelby
The Administrators announced a sale of much of CTL’s infrastructure to Shelby Finance for c £8.5 million. Shelby currently trade as Dot Dot, a very small payday lender, and are a subsidiary of the doorstep lender, Morses Club. This is known as a “pre pack” sale – it was all planned before the administration started.
50,000 CTL customers, including all Juo customers, have had their loans transferred to Shelby.
The accounts sold to Shelby were considered to be “in good standing” with no arrears. The Administrators say “a small number” of people who were transferred to Shelby may get some compensation for unaffordable lending – those affected will get an email from Shelby about this. But most people transferred to Shelby will not be getting any refunds.
650,000 other CTL accounts remained with CTL. Many of these are accounts that have not been used for some time. Many current and old customers may be owed compensation for inappropriate lending.
Outstanding loans sold to Lantern in May 2019
No payments for outstanding loans were taken by the Administrators. Balances were frozen, with no further interest or charges added. Credit records will be corrected so no late/missed payments will be recorded because of this.
Many people with outstanding balances may have these reduced because of redress, see below.
In May 2019 the loan book – the legal term for all the outstanding loans – was sold to Lantern, a debt collector.
Borrowers whose loans were sold were sent an email explaining this.
Determining complaints and calculating redress
WDA stopped its normal complaints handling when the administration started. It has not paid any refunds after administration, including refunds that were agreed before administration.
Under the Insolvency Act, the Financial Ombudsman (FOS) couldn’t carry on with their decision-making once a firm goes into administration. All WDA complaints with FOS were returned to the Administrators to settle.
The Claims Calculator
The Administrators put all loans from Wageday Advance, past and present, including those over 6 years old, through the Claims Calculator that has been developed.
The Claims Calculator was intended to give roughly similar results to typical FOS decisions. A loan was determined to be inappropriate by the calculator if it failed any of three sets of criteria:
- affordable – looks at loan size, income and expenditure evidence;
- sustainable – looks at the number of loans, the gaps between loans, roll-overs and how much loan amounts increased;
- responsible lending – looks at what a CRA check showed eg defaults, debt management and numbers of other payday loans.
For inappropriate loans, a redress amount was calculated as a refund of interest and charges, plus 8% statutory interest.
For customers who had already had an offer or a FOS decision, the redress was set at the largest of:
- what the Claims Calculator said;
- any Final Response offer from WDA; and
- the value of redress determined by the Financial Ombudsman.
Customers who still owe a balance
People who had a balance outstanding and who should get redress got an email from the Administrators with the subject Important information about your loan even if they haven’t submitted a complaint.
Here is an example of the key figures:
- Outstanding loan balance at 25 February 2019 per CTL’s records 420
- Less: balance adjustment (165)
- Adjusted loan balance 255.
If your redress is smaller than the balance, you will still owe some money – £255 in the above example.
Where someone has only had one loan, the balance has been reduced to the amount borrowed less what the customer has paid so far. This is what FOS would have decided if the loan was unaffordable.
If the calculated redress is larger than balance the redress cleared the balance and a further email was sent about the remaining redress.
Customers who are owed refunds for unaffordable loans
The Administrators sent emails with the subject Important information about your redress claim. These say:
- what your calculated redress amount is;
- that you are an unsecured creditor with a claim against CTL for this redress amount;
- there was button in the email to submit your claim before the deadline (which has now passed).
Credit records
The Administrators updated customers’ credit files to remove credit records for loans that they decided should be refunded because they are inappropriate.
20 May 2020 – payments made
On 20 May 2020 the Administrators announced all unsecured creditors, including people owed money for unaffordable loans, will get 5.68p in the £.
An email was sent to everyone saying what they would receive and payments started immediately.
Where payments bounced back, people were asked to supply updated bank details and further payment runs were made over the next months.