As millions of people have found, it was easy to get a payday loan but then get trapped into a cycle of borrowing more. If you couldn’t afford £300 this month to buy a new washing machine or pay a garage bill, you probably couldn’t repay that amount – plus the high interest – the next month.
So people ended up rolling the loan or borrowing from one lender to repay another or not paying priority bills such as council tax and utilities.
The consequences were often impossible levels of debt.
Escaping from the payday loan trap
If you are currently borrowing from one or more payday lenders, it can be very hard to escape from their clutches.
It may seem scary to tell them that you can’t afford to repay them this month and you need a repayment plan over a much longer period… but you can’t keep paying these debts if that leaves you so short you have to borrow again to get through the next month.
At some point this has to stop, and every month things get worse, so the sooner you do this the better.
The payday loan cap introduced in 2015 means the lenders can’t carry on adding interest or charges so your debt balloons out of control.
Read What to do if you are still using payday loans – a temporary DMP may be your best option, letting you pay less to your debts whilst you start asking for refunds.
Asking for compensation – get a refund of the interest you paid
You may be able to reclaim money even if you repaid your loans on time! So if you had a problem a few years ago, or you still have one now, find out the details.
Make an affordability complaint if:
- you were given an unaffordable loan that meant you had to borrow more and
- the lender should have been able to tell from your credit record, your low income or the fact you are repeatedly borrowing that the loan was unaffordable.
If you borrowed or rolled over loans from the same lender repeatedly, then you may have a very good case.
Or if you couldn’t afford to repay the last loan so you still owe some money. You can still ask for refunds if your payday loans ended up in a DMP.
People are getting outstanding debts written off and/or large refunds. We have seen many over £5,000! Here is one reader’s comment in December 2018:
From April 2017 to March 2018, the Financial Ombudsman received more than 17,000 complaints about unaffordable payday loans, and it agreed with the customer in more than 60% of cases.
The ombudsman then planned around being sent 20,000 cases in 2018/19. But in December it admitted it now expects to get 50,000 cases this year,
Making an affordability complaint
The following articles explain how to do this:
Payday loan refunds – how to ask for one This article is a step by step guide including free template letters for you to use. If the lender refuses, then go to the Financial Ombudsman who is upholding many of these complaints.
At the bottom of the article are thousands of comments from readers that have used these letters to get refunds – it’s a good place to ask any questions.
How to discover which payday lenders you used Many people changed banks to escape from the clutches of the payday lenders and later binned any paperwork relating to what had been a dark time for them. If you can’t remember who you used, this article looks at how to find out.
Payday lender says you lied – does this mean you can’t get refund? No! We have seen lots of cases where people have had refunds when their loan applications were not right.
Refunds where you still owe some money If you still owe a balance on your last loan, look hard at any offer to write it off. It may not be as good as it sounds.
Gambling and payday loan refunds People worry they will be refused a refund if there is gambling showing on their bank statements – but here are examples of the many Financial Ombudsman decisions where people are winning these cases.
What to do if a lender says your loans are over 6 years old so they won’t consider a complaint The Financial Ombudsman has decided it can look at loans that are over 6 years old if you have only recently found out that you can complain. So don’t believe a payday lender when they tell you they are too old!
The process is the same for all lenders, but here are some pages that look at what to expect if you are complaining about specific lenders:
- Wonga – now in administration so the complaint procedures are different.
- How Quick Quid are handling complaints – slowly and obstructively is the answer, and it often makes poor, low offers to very good cases! But readers are getting good results from going to the Ombudsman.
- Payday UK, Payday Express and the Money Shop – these brands are all part of the same group. And they are paying out for loans over 6 years!
Some people are being cold-called by Claims Management firms or seeing adverts saying they are payday loan refund experts. Here are the reasons not to use a claims firm for a payday loan complaints. It’s not just the cost, they often do a poor job and make the process slower – you can do a better job yourself!
Some of the alternatives are just as bad
Many lenders are getting out of the business and the ones that remain are offering fewer loans. The payday lending industry says it is really worried that if there are less payday loans, more people will borrow from loan sharks. Debt charities call this dishonest and scare-mongering, pointing out that that there is no evidence this is happening. In January 2017, Citizens Advice said it had not seen any increase in the numbers of people it was seeing with loan shark problems since the clampdown on payday loans in 2014-15.
Many of the other high-interest alternatives to payday loans can be very damaging – Bad credit loans to avoid looks at logbook loans, guarantor loans (such as Amigo) and rent-to-buy shops (such as Brighthouse).
What to do if you are refused a payday loan looks at the better options that might work for you.