PAYDAY loan and other short-term lenders are still charging borrowers DOUBLE the amount lent in interest and fees.
Back in January 2015, city watchdog the Financial Conduct Authority (FCA) capped the amount high cost credit firms could charge.
Under its rules, borrowers never have to pay back more than double what they originally borrow.
But four years on and an investigation by the Mail on Sunday reveals that many lenders are still charging borrowers the maximum – or close to the maximum – allowed.
LoanPig borrowers, for example, will repay a whopping £2,000 on a £1,000 loan taken out over six months.
While Lendingstream, Sunny, PiggyBank, Mr Lender, and Satsuma all charge close to the maximum £1,000 allowed on a £1,000 loan.
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 DebtCamel, MoneySavingExpert and MoneyAdviceService – 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 Financial Ombudsman.
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.
The report also found that some lenders are burying fees and interest rates making it hard for borrowers to calculate exactly how much they’ll be charged.
With Lendingstream and Sunny, for example, you can’t find out the amount you’ll be charged without setting up an account and applying for a loan.
It comes as complaints about payday lenders soared by a whopping 130 per cent in 2018, according to the Financial Ombudsman Service.
The complaints body received nearly 40,000 new complaints about short-term lenders last year – up from 17,000 in 2017.
It told The Mail on Sunday: “From the number of complaints we have received it seems the system is not working.”
StepChange debt charity added that debt problems are “made worse by the availability of these high-interest loans”.
The FCA meanwhile, told the Sunday paper that its “eye is not off the ball” but equally it doesn’t want to leave borrowers with nowhere to turn to when their banks say ‘no’.
The Sun has contacted the FCA, the Financial Ombudsman Service, and StepChange we’ll update this story if we get a response.
High cost credit trade body, the Consumer Finance Association, says high interest rates reflects the cost of these loans.
A spokesperson said: “The price is based upon recovering all costs over a short period and also reflects the risk a lender is taking that a high street bank is not willing to make.
“The average short-term loan is about £300 repaid over a short period which is a financial lifeline for hundreds of thousands of customers.”
The Sun has reached out to all of the lenders mentioned in this article and we’ll update this story if we get a response. At the time of writing, only LoanPig and Amigo Loans had replied.
A spokesperson for LoanPig said: “We are not predatory, nor do we disguise the costs involved in providing short term loans to customers who have been given the cold shoulder by their own Bank.
“At LoanPig.co.uk, we manually assess every loan offered, we make to ensure the customer knows the full facts of the loan and that they can afford the repayments.”
Amigo Loans didn’t comment, only telling The Sun that as a medium-term rather than short-term lender it shouldn’t have been included in the Daily’s Mail’s research.
Stop the Credit Rip Off
Our Stop the Credit Rip-Off Campaign has also seen the FCA crack down on “exceptionally high” rent-to-own products, as well as make a raft of changes to overdrafts and introduce stricter rules for doorstep lenders.
A whopping 5.4million high cost credit loans were taken out in the year to June 2018, according to the FCA, up from 4.6million in the same period the year before.
One payday loan firm charging up to 306 per cent interest has even been targeting hard-up Brits in Facebook groups.
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at email@example.com