In January, a reader told me about a loan he had for £650, with 18 monthly repayments of £147. This adds up to a total repayment of £2,650 – an eye-watering amount and more than four times what he borrowed.
At first I thought this was probably taken out years ago. But in fact, it was borrowed in late 2018 from Loans2Go.
Loans2Go also offer logbook loans, but this article is just about their standard personal loans. I have updated this article with information about what the Financial Ombudsman thought about one of these loans.
These Loans2Go personal loans:
- are for amounts between £250 and £1,000;
- all have an 18 month term;
- there is a set APR of 990%.
The quote above is for weekly repayments. You can also choose to repay monthly or fortnightly but this makes little difference to the total repayment.
Is it legal to charge that much interest?
The loan was taken out by the reader when he was desperate and didn’t think closely about the cost. But now he wants to know if it is actually legal to have to repay that amount.
There is a maximum cap on the amount of interest that can be charged on payday loans. Lenders can’t add more in interest and charges than the amount borrowed. If that payday loan price cap had applied to this Loans2Go loan:
- the maximum repayment would have been £1,300, less than half what L2G charges;
- the monthly repayments would have been lower than for L2G’s loan.
The FCA calls payday loans “High Cost Short Term Credit”. Its definition of High Cost Short Term Credit is a loan over 100% in APR and of 12 months or less.
So the Loans2go loanr looks as though it is outside that definition because it is 18 months long..
But there is a small point in the FCA’s definition that says it also covers loans which are to be “substantially repaid within a maximum of 12 months“.
A recent Ombudsman decision on a Loans2go loan
Normally you don’t get very far if you complain to the Financial Ombudsman (FOS) that the interest on a loan was too high.
You can win complaints about expensive credit if you can show the loan was unaffordable for you, but not just because the interest was too high if it was clearly explained at the start… and it was legal.
But here is a decision from the Financial Ombudsman about one of these L2G loans: Miss R’s personal loan provided by Loans 2 Go Limited .
Miss R borrowed £900 and was due to repay about £3,700, so about £2,800 in interest – she complained this was too high. She didn’t make an affordability complaint.
Does the loan breach the price-cap?
The Ombudsman points out that some respondents to the FCA’s consultation on the price-cap rules wanted the definition to be more specific, warning that loans of up to 24 months could potentially be caught by it. But the FCA said the definition was broad in order to prevent firms from trying to avoid the rules.
The Ombudsman was concerned that:
the potential harm to a consumer – as a result of having to pay such excessive charges over a longer period – is arguably greater [than for a loan of less than 12 months].
I think that last point is exactly right. If Miss R had taken a payday loan she would have paid a lot less each month and for a much shorter period than taking the L2G loan.
The interest rate was outrageous
The Ombudsman decided he didn’t have to rule on whether the loan broke the payday loan price cap because the interest rate was in any case simply too high:
this loan had an interest rate so outrageous (i.e. one which works out at well in excess of 100% per annum) that I think a court may well have found it grossly exorbitant and that the agreement grossly contravened ordinary principles of fair dealing.
He reached that decision looking at Miss R’s situation and the fact that L2G knew she was in financial difficulty:
L2G … unfairly took advantage of the situation by providing such an expensive product.
So the Ombudsman’s decision was that L2G should reduce the starting balance on Miss R’s loan to £1,800 instead of c. £3,700 – a major cut in the amount of interest she had to pay.
How to complain about one of these loans
You have two possible reasons to complain about this sort of L2G loan:
- that it was unaffordable for you – the monthly repayments were so high you couldn’t afford to pay them without hardship, borrowing more or getting behind with important bills. This is a standard affordability complaint, used for many other sorts of loan. If you win this you will get a refund of all the interest.
- that the interest rate was unreasonably high and that L2G was not treating you fairly in offering you this loan. This complaint is much more unusual. You could win this even if the loan repayments were affordable for you, and Miss R’s case suggests you would get the interest reduced if do.
I think most people should make an affordability complaint using the template letter here: Affordability complaints for large bad credit loans. and add on another sentence to that template saying how the interest rate on the loan was exorbitant.
Ask for a refund for large bad credit loans
Complaining about a guarantor loan
How to ask for a payday loan refund
JOJO says
I got £3000 and had £9600 to pay back in total. Still paying now. I was stupid very stupid but on my road to becoming debt and high interest/PDL free thank God!
Anyone who has not broken the cycle yet do it asap these companies should be stopped or all capped.
I am in a DMP and have broken my cycle and it’s the best thing I ever done.
Ray says
Legal fraud should be illegal thieves
Michael says
I had a loan with Loans2go for £250
Which cost me £1019.52
I did manage to save £247 paying it early but still paid out over £750
Can I get some advice as I’m planning to complain as they have 100% Exploited people in a Vulnerable position
Sara (Debt Camel) says
Hi Michael – I think exploitation is a very good way of putting it :(
You can complain to Loans2Go saying something like you feel you were charged a highly unfair interest rate, you accept that what you would pay was explained to you, but you feel the lender exploited your situation to charged an abnormally and unfairly high rate of interest. Ask for a refund of the interest you were charged.
Expect Loans2Go to reject this complaint and then send it to the Financial Ombudsman, see https://www.financial-ombudsman.org.uk/consumer/complaints.htm.
Also reading https://debtcamel.co.uk/refunds-large-high-cost-loans/ which looks at an affordability complaint for this sort of loan. If you think the repayments were unaffordable, start with the template letter there for a complaint and add on a paragraph about how high the interest rate was and how you feel you were exploited.
steve says
Hi.
I had a logbook loan with L2G my car broke down i couldnt make my payment so they took my car stating it was theirs to do what they want a scrap man came for my car and they received £300 for it when my loan was over £4500 and then they told me to pay balance remaining i only had a £1600 loan with them.
I put in an affordability complaint and they delayed a lot and i got final decision 13 weeks later after excuse after excuse and it was rejected.I sent the complaint to FOS and the guy who looked at all my loans including this one saw that the was many errors on L2G part and upheld my complaint and cleared my outstanding balance and i got just under £500 back in which i thought was disgusting as i had paid 5 times that. I lost my car for £500 really in my eyes but at least the loan was paid off and taken away from my credit file and now i can forget about it.
All i can say is if you are going to make a complaint about them be prepared to wait and wait as they play so many delay tactics
Pearlygirly says
High interest credit is a terrible thing. But some of the lower interest products out there can also end with the borrower paying many times what they borrowed. I know someone with what was originally a £15,000 loan currently at £56,000 and climbing. There is a CCJ and charging order. Blemain finance (secured loans don’t see them so much now) arent using outrageous interest to make their money but they add so many charges the debt soon spirals. Not to mention expensive but often pointless PPI, charges for not having or renewing house insurance ( they add their own to your debt and its typically 4 times the usual cost) and excessive charging for late payments, phone calls / letters chasing the debt etc. Interest is added to all these and it snowballs. Worst of all the loans are secured on property and people can’t easily get out if the mess it causes. Its worth checking all of these kinds of things before you borrow as some of the more benign looking lenders may have different traps for the unsuspecting, especially when things go wrong.
Christian white says
I borrowed a total of £700 from Loans2go. The original loan was for £500 (October last year) and I topped it up after getting texts from them in February this year. I was already in a DMP. I have borrowed to fund a gambling addiction so I have to take responsibility for something that has undermined my mental health and resulted in my home being repossessed. The loan was put into the DMP and Loans2go have come back and given my DMP company a balance of £2537 to pay off thus extending the plan further.
I have made errors before people judge me but I feel really strongly that giving a balance of £2537 is incredibly unfair. Do I have any way of making a serious complaint? Or is my own stupidity and recklessness likely to undermine any complaint I might have?
Any help or advice much appreciated. Thanks Chris.
Sara (Debt Camel) says
I am sorry you got caught by this horrible loan.
Did you have mortgage arrears at the time you applied for the loan or the top-up?
Can you say what your total debts are now, including this one and any debt from the house repossession?
Who is your DMP company and have you been making payments to them during the time your house was repossessed?
Christian white says
Hi the house was repossessed in 2011. The sale plus the 5 years I’d made repayments easily repaid the original loan + about £20000. Even so, still had interest of £45000 to repay. I’ve repaid about half but it’s been erratic. Total debts now are about £50000 (that’s the remaining interest from the repossession plus the debts in the DMP). I’m with Payplanplus. I’ve been with them since the house was repossessed. They’ve been brilliant tbh. But lots of the debt includes huge amounts of interest from high interest loans. The DMP is due to finish late 2020 because I’m making huge monthly repayments into it now.
Chris.
Sara (Debt Camel) says
Good luck with getting a lot of interest back and speeding things up!
You might also want to look at whether some of the older accounts in your DMP are still enforceable – credit cards, catalogues, old non payday loans etc – see https://debtcamel.co.uk/settlements-old-debts-cca/. This won’t tend to work with payday loans taken out online or if the debt hasn’t been sold to a debt collector.
Also have you checked for any PPI?
Sara (Debt Camel) says
re complaining about this horrible loan – use the approach on this page https://debtcamel.co.uk/refunds-large-high-cost-loans/, not the standard payday loan complaint. Also add a paragraph saying you think the interest rate was grossly unfair and taking advanatge of desperate customers. And take it to the Financial Ombudsman if the complaint is rejected.
It’s not an easy complaint but i think anyone who has been robbed this way should be complaining and saying how unfair it is.
Christian white says
Thanks Sara. Will look into the older debts and tackle Loans2go about the interest and let you know any developments. Cheers. Chris.
Chris says
L2G rejected my complaint – very quickly! I can’t be sure but I think this was before I’d actually complained! They must have taken my SAR as a cue for action. The argument was that all the costs are upfront so I knew what I was getting into. Have now sent the complaint to the FOS. Will let you know. Chris
Scott Barton says
Loans2go issued a loan to me before I’d even agreed to take it…I found credit elsewhere so just ignored their initial call…next thing I get a text and email saying that the loan had been issued and was sent an agreement I never signed saying they want over £3000 for a £750 loan. Theres 2 different repayment dates stated so that’s not clear… Then they attempted to take payment from my account before either of those dates, so far I’ve not paid anything what can I do to stop the agreement it’s over 14 days and the funds they sent were used by other loan repayments I owed before I could do anything on top of this they’ve filed 3 or 4 fraud search’s on my credit file all on the same date as if they were/are trying to stop me being able to get a loan off anyone else
Sara (Debt Camel) says
Send them a complaint listing all these problems. Say you want the interest removed so you only have to repay the 750 and you want a payment arrangement so you can pay that back at an affordable rate. If they refuse, send the complaint to The Financial Ombudsman Service (FOS)
Also say you aremaking a Subject Access Request (SAR) for all the personal information they hold about yiu including, but not limited to, applications, all credit and other affordability checks, a statement of account for the loan, and a record of all phone calls. The details from this may help with a complaint to FOS.
david says
hello,
I note this article mentions it only relates to L2Go loans and not logbook loans, but can you still make the same kind of affordability complaint regarding a logbook loan?
I had a loan from Loans2Go in 2012, shortly after also taking on an Amigo Loan, prior to that i’d had a V5 logbook loan too from 2009, of which the car was repossessed at one point – I had to borrow £1,300 from a family member just to go and pay for the auction site in leeds to release it back to me, I still had about £2k to repay which I somehow managed, all the while incurring debt elsewhere in order to afford it.
just wondered if I could look into this like I have with payday and amigo loans.
Sara (Debt Camel) says
Yes you can, use the template letters here for logbook loans: https://debtcamel.co.uk/refunds-large-high-cost-loans/
david says
thank you Sara.
i’d already performed PPI checks to ensure they didn’t add anything I wasn’t aware of (as it turns out i don’t think logbook loans can add PPI etc) but I haven’t complained about unaffordability so will look into it today.
Scott says
Ok I got a new one….according to Loans2go:
“the early settlement figure we provided is not an internal calculation and is one that has been provided by the FCA”
since when does the FCA do the calculations for companies, guessing this is a blatant lie
Sara (Debt Camel) says
The calculation is set out in legislation: http://www.legislation.gov.uk/uksi/2004/1483/pdfs/uksi_20041483_en.pdf.
It would be fair to say that in most situations where people are outraged at the settlement figure quoted, the correct calculation has been done :(
But of course Loans2Go may not have got it right…
If you have a had one of these horribly expensive loans, I suggest you complain about the interest rate as the article above says and tack on that you don’t think the settlement figure is accurate as a secondary matter.
scott says
Thank’s Sara, it was more the context they made the statement as if they have no option of reducing the amount.
I have already complained, they even tried to take the first installment of for the loan almost a week before the due date. I would have thought this was them breaching the contract.
I have even offered to repay the principle in full in one payment but they’re saying as it was taken 3 months ago I’ve missed the right to withdraw. Am I even still bound by a contract they haven’t adhered to?