Why do people lose payday loan refund cases at the Financial Ombudsman?

People often ask Do I have a good case for a payday loan refund?

If you are wondering this, it can help to look at why some people have their complaints rejected by the Finanical Ombudsman as this shows which complaints may be tricky.

You may then realise that your complaint probably won’t be difficult at all! Read How to ask for a payday loan refund for template letters. It has comments from thousands of people who have made these complaints.

Most Financial Ombudsman cases are decided at the first stage by an Adjudicator decision. Details are only published for the ones that go to the “second stage” and get a final decision from an Ombudsman.

I have decided to look at some published cases for Wonga that were rejected. But most of the points here apply to all lenders.

Wonga Ombudsman decisions in the first 6 months of 2018

There were 73 Ombudsman-stage decisions for this period when I looked in early July 2018.

62 of these were decided in favour of the customer by the Ombudsman.

Of the eleven that were marked as rejected, one appears to have been marked in error – the customer was refunded all interest on loans 4-18 and the interest he was charged on the top-up of loan 3. I think he would have been very happy with that decision!

Here are links to and some notes on the ten complaints that were rejected. The Remember part is my comment on each of these.

A large previous write off (link)

Mr C had five loans from Wonga and topped up four of them. The last loan was much the largest and it looks as though Mr C defaulted on this, as the balance was written off by Wonga. This meant Mr C had repaid £545 less than he had borrowed on the last loan – which was more than the interest he had paid on the previous loans.

Remember: This situation only happens with Wonga. If your write off was small or you had borrowed a lot before the write-off, you may still get a refund. Think of the write off as being the first part of your refund – how much more is there likely to be?

No bank statement (link)

Mr C only took two loans from Wonga but the second was much larger, so the Ombudsman said Wonga should have made some extra checks, which it didn’t do. However to win an affordability complaint the Ombudsman does need to be convinced the extra checks would have shown the loan wasn’t affordable, but Mr C did not provide his bank statements to show this.

Remember: providing bank statements is the normal way to show a loan was unaffordable. If there is a good reason why this is impossible, you need to explain this to the Ombudsman.

One instalment loan (link)

Mr G only complained about an instalment loan taken in 2016. He had several other loans from Wonga but they were all more than 2 years before.

Remember: it’s hard to win a one loan case. It may be that if Mr G had complained about the earlier loans, some of them would have been unaffordable – so always complain about all your borrowing, don’t make a guess and rule some out.

Four loans, the first three small (link)

The first three loans were small so the Ombudsman said Wonga should have asked for expenses details for the larger fourth loan. The problem is that Mr H’s did not give accurate figures, so the Ombudsman decided it was reasonable for Wonga to think the repayments were affordable.

Remember: you can win cases if you haven’t given accurate information, about your income or expenses – see Payday lender says I lied for some details. But if there were very few loans and the repayments were small, it is going to be hard because the payday lender couldn’t guess you were in trouble,

Six loans over a period of more than four years (link)

Miss M had six loans from Wonga, but there were many large gaps between the loans. And the largest loan was an instalment loan. The Ombudsman decided:

I don’t think it is reasonable for me to say that Wonga should have been greatly concerned here about Miss M being reliant on its lending.

Remember: it’s hard to win a case when there are large gaps between the loans.

One small instalment loan (link)

This was a loan to a student, so even though it was small, his income was also low. The problem here is that he was living at home, so his expenses were also very low,

Remember: it’s hard to win a case about one small loan.

Two instalment loans, the second with lower repayments (link)

Mrs K had 2 instalment loans both for £500, but the second was over 6 months, so the repayments were less than on the first loan.  She also had a gambling problem but her credit record was ok. The Ombudsman decided that Wonga couldn’t have realised she had a problem.

Remember: a lot of gambling cases are won (see How gambling affects payday loan refunds for details) but gambling makes it harder for a lender to see that you have a problem early on. Just two loans wasn’t enough.

Unexplained large deposits (link)

Wonga gave Mr G 17 loans between January 2011 and August 2013.  There were a few gaps of several months between some of the loans, but the Ombudsman is clear that these were not why the complaint was been rejected:

Given how many loans Mr G had taken, I don’t think gaps of five to six months could be looked at as being substantial enough that it should be considered proportionate for Mr G to be treated as if he were a new customer.

The problem was that Mr G’s bank statements showed a lot of large deposits, apparently from another account in his name, £17,000 in total over this period. The Ombudsman asked for more information about these and Mr G said he could not remember them.

Remember: This is an unusual case. But if the ombudsman asks for information about another account you have, you need to provide answers to these questions.

4 small loans (link)

Here the loans appear small in relation to the customer’s income and there was nothing on her credit record to suggest she had problems. The later two loans were also smaller than the first two.

Remember: If your loans are small, then you need something else to help win your case. This could be a larger number of loans, or the amount borrowed going up which shows your position is getting worse, or a poor credit record.

A settlement offer had already been accepted (link)

Wonga offered a refund on four out of twelve loans and Mr D accepted it. Then a few weeks later Mr D said he also wanted to complain about the way he had been treated, as he had mental health issues.

The Ombudsman rejected this complaint as Wonga hadn’t been aware he had mental health issues at the time of the lending.

Remember: This is a sad case. It sounds quite likely that if Mr D had rejected the original Wonga offer he would have had a larger refund by going to the Ombudsman. You can’t change your mind when you have accepted an offer.

The most common things that went wrong were…

In most of these cases, the problem was the payday lender couldn’t have realised the borrower was becoming reliant on the borrowing.

The more loans you had, or the larger they were, the more likely it is that the lender should have realised you were in trouble and stopped lending. Even a single loan can be a good case if it was large and your credit record was poor. And you can win a case even if the loans were small if you kept on borrowing every month.

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