Payday loan reclaim firms ‘rip-off’ customers by taking almost HALF of refunds
HUNDREDS of hard-up Brits are losing out on almost half of refunds from payday lenders to "rip-off" reclaim firms, according to an investigation by The Sun.
Reclaim firms, which often advertise during day time TV, charge up to 45 per cent to help borrowers claw back cash for mis-sold payday loans.
While claims firms are legally allowed to do this, it means customers can lose up to £450 on a £1,000 claim - nearly half the amount owed.
Payday loan complaints soared by 130 per cent in the 2018/19 financial year compared to the previous year, with the Financial Ombudsman Service receiving 39,715 new complaints up from 17,256.
Just over half of these cases (53 per cent) were upheld by the Financial Ombudsman Service in favour of consumers.
But despite the city watchdog, the Financial Conduct Authority (FCA), capping the amount firms charge for PPI compensation claims at 24 per cent there is no cap for other claims, such as payday loan refunds.
Experts have slammed the firms for "ripping off" customers.
"Claims management companies just send off a standard email, they don't do anything complicated and don't give individual support to clients. It's a rip-off," Sara Williams, debt adviser and founder of the Debt Camel blog said.
Martyn James, consumer rights expert at complaints tool Resolver, said: "Payday loan compensation is a refund of massive charges and interest that pushed people in desperate situations to the bring.
"Taking a huge chunk of cash for doing virtually nothing is deplorable."
Reclaim firms say that fees are more expensive than PPI claims because they are more complex and funds reimbursed are lower.
They say the average payout is £1,400 for payday loans, while MoneySavingExpert says typical PPI compensation is about £3,000.
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, it has 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, such as 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.
and are completely free tools 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 free letter templates on and on the , - although some lenders will have their own reclaim tools set-up.
You can complain even if the lender has gone into administration, although then you will need to submit the complaint to the adminstrator.
3. Go to the Ombudsman
If you haven't heard anything back after eight weeks then you should take the issue to the .
You should also contact it if your complaint is rejected, the refund is too low or the firm refuses 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.
Borrowers are due compensation on a payday loan if they were sold a loan they couldn't afford to repay.
While PPI (payment protection insurance) was a product added to loans or credit cards to cover payments if customers fell ill or were made redundant.
This was often forced on to customers or they were sold unsuitable policies, but the deadline for reclaiming PPI ended yesterday.
The FCA has told The Sun that it's considering a cap on all other types of reclaiming.
Simon Evans from the Alliance Of Claims Companies, which represents three of the firms included in this investigation (Ashley Howard, Allegiant Finance Services, and The Central Claims Group), says customers have many options when it comes to reclaiming payday loans.
He added: "They go into this with their eyes open with fees clearly displayed and perhaps the finger of shame should be on the payday lenders that gave out these unaffordable loans to begin with."
Allegiant Finance Services, Blue Panda Finance, My Claim Solved, Redbridge Finance, and Sanderson Drake all said they are clear about fees to customers and that the complex nature of claims makes them more expensive to process.
The Sun also contacted Ashley Howard, Fast Track Reclaim, Impakt Claims, Payday-Claim, PaydayLoansClaimback, Payday Refunds, and PDRC but they had not responded by the time of publication.
More on loans
Earlier this year we warned that thousands of payday loan customers are "tricked" out of full refunds after using claims firms with "misleading" ads.
But you can reclaim yourself. We spoke to a dad-of-two who got a £3,750 refund for a £600 payday loan he couldn’t afford.
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