Thousands of payday loan customers ‘tricked’ out of full refunds after using claims firms with ‘misleading’ ads
BORROWERS are missing out on thousands of pounds worth of payday loan refunds by using claims firms that take a 30 per cent cut of their cash.
Experts say these firms are "misleading" customers by not making it clear you have to pay for their services.
When The Sun checked, two of the four top results on Google for "payday loan compensation" were adverts for claims management companies - but neither said in their ads that they would charge a fee.
The first ad, which was for a company called Payday.claims, went as far as to state there were "no upfront fees" and "no hidden charges".
But it's only in the small print of the company's website that it says it takes a 25 per cent fee, and this charge is payable even when cash reclaimed is used to pay down existing debts.
The small print also lists a host of other fees you'll be charged, including a £25 fee for sending emails on your behalf if you cancel the claim before compensation is paid.
"Many claims companies also refuse to take strong cases involving loans of six years old to the Financial Ombudsman Service - they only want to deal with the easiest ones where a simple email will work."
"Instead, you can get an easy template to follow for free online."
The ASA has taken action in the past where claims firms have listed an amount people could reclaim without saying a fee wastaken from this.
How to claim a refund from payday lenders
YOU can claim compensation from a payday lender if the loan was unaffordable, even if you've finished paying it off.
If you think you are owed compensation, then then you should follow these steps from DebtCamel on how to claim.
1. Check if you were mis-sold the loan
Before a lender gives you a loan, they have to check whether you are able to pay it back.
For a payday loan to be affordable, you had to be able to pay it back the following month as well as pay your other bills and debts.
The loan was unaffordable if:
- you often rolled loans or borrowed again soon after repaying a loan;
- your loans from a lender were increasing in size;
- some repayments were late; or
- the loan was a significant part of your income.
Ask the lender for a copy of your loan details, like when you took it out and how much interest you paid.
Compare it to your bank statements from the time you took it out and work out if you would have been able to pay back the loan after you paid your bills.
2. Make a complaint
There are websites that will help you submit your complaint to the lender but beware that if you're successful they will take a cut of your compensation.
DebtHacker.co.uk is a completely free tool that will help you with the same process.
If you'd prefer to do it yourself then you should write a letter or email citing citing "unaffordable loans" and ask for a full refund of the interest and charges you paid, plus the 8 per cent Ombudsman interest on top.
Also ask for the loan to be removed from your credit record.
You can find letter templates in , and - although some lenders will have their own reclaim tools set-up.
You can complain even if the lender has gone into administration.
3. Go to the Ombudsman
If you haven't heard anything back from them after eight weeks then you should take the issue to the .
You should also contact them if your complaint is rejected, the refund is too low or they refuse to consider loans that are over six years old and have been sold to a debt collector.
But be aware that you can't usually complain to the Ombudsman where the firm has gone into administration.
These firms are currently allowed to charge whatever fees they like though as the Financial Conduct Authority (FCA) only caps claims management fees at 20 per cent for PPI.
But it is considering introducing a cap on the fees firms charge payday loan borrowers.
When it comes to Google, the search engine says adverts for payday lenders where repayment is due within 60 days are banned but it does allow ads for claims managements firms.
A Google spokesperson said: "Because we want the ads people see on Google to be useful and relevant, we have policies that prevent ads for payday loans where repayment is due within 60 days of the date of issue.
"If we discover sites that are breaking this rule, we take appropriate action."
Payday loan mis-selling is big business, with complaints to the Financial Ombudsman Service rising to 40,000 in 2018, up from 17,000 the previous year.
The problem is that many of these loans were unaffordable and shouldn't have been dished out in the first place - but people don't realise they can reclaim for free.
We spoke to one dad who landed a £3,750 refund for a £600 payday loan he couldn’t afford.
Blue Panda Finance, which is the company behind Payday.claims didn't respond to our request for comment.
A spokesperson for Quickly Finance, which is behind Fasttrackreclaim, said: "The firm entirely complies with all advertising and regulatory requirements regarding its website and advertising campaigns.
"While a number of consumers wish to undertake claims for payday loans and other areas themselves a substantial number prefer to instruct a third party to do so for them.
"A client is unable to progress through the website without agreeing to the terms and conditions which expressly state the fee.
"We consider the fee amount is a fair amount. Such fees are within the normal parameter of claims management services and the regulators in this area have not capped such fees to date."
Payday lenders themselves, charging up to 306 per cent interest, have been targeting hard-up Brits in Facebook groups.
And many borrowers are still charged DOUBLE the amount lent.
Plus, we reveal the areas where loan sharks and payday lenders are preying on people – and how to get affordable credit.
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