Have you ever had a payday loan? Chances are, you probably already know about the high interest rates that come with short-term lending. But do you know that if you were wrongly approved you can get a payday loan refund?
Speaking from experience (an experience from a few years ago that I will never repeat!) if you are considering trying to claim back interest on previous payday loans I would encourage you to do so. I put in multiple claims last year and ended up getting a significant sum back (over £800 after claim company fees) from various lenders. Most of the lenders accepted from the information provided and the details they had that the loans were not affordable at the time they were taken out and should not have been approved. One lender rejected the claim and it then went to the financial ombudsman, who ruled in my favour.
Should You Use a Claims Company?
I used a specialist claims company to take care of my payday loan refunds and as a result they took a percentage of the refunds as their fee. At the time I really just stumbled upon the claims company on a Facebook ad. I hadn’t even considered claiming or was even aware that you could claim back on a payday loan and so I was very much of the nothing to lose mindset. I didn’t want to put any of my time into it being dubious of the possibility of success but if someone was going to do it for me and only take a percentage fee if it was successful then why not!
In hindsight seeing how successful and straight forward my claims were I would have just handled the while process myself and saved some money.
What many people might not know is that you can easily claim back money for interest you paid on anything judged to be an unaffordable loan. Some borrowers have had to keep borrowing just to pay interest rates! Some of the rates that have popped up over the years have been absolutely mind-boggling.
But can you claim back interest on payday loans in all cases? How successful are payday loan claims in general? In this guide, we’ll be taking a closer look. However, it’s probably best we start at the beginning.
What is Defined as a Payday Loan?
Payday loans may seem like a good idea when you’re in a pinch, but they’ve come under a bit of fire in recent years. Payday borrowing allows you to borrow a specific amount of money for a short period of time. Essentially, it’s to help bridge the gap between paydays. As mentioned, however, it’s exorbitant interest rates which have left plenty of borrowers in a sticky situation.
However, plenty of people are now searching for how to claim back on payday loans. This is as a result of regulatory intervention in recent years, which led to plenty of lenders having to cut down on their massive rates.
How to Get a Payday Loan Refund
Regardless of the amount borrowed and whether you were indeed mis-sold credit, you may still be able to claim some of the cash you paid back. Another form of credit you may be able to claim back is PPI, or payment protection insurance. In many cases, this additional premium will have been added to credit borrowed from payday lenders. Below I have set out 7 steps to take to give you the best chance of a successful claim.
Step 1: Find Out if You Are Eligible to Make a Claim
There’s a little bit of red tape you’ll need to cross before you can dive straight into making a claim. The Financial Conduct Authority (FCA), regulates all payday lenders and has stated that all money lent to borrowers should be feasibly repayable. This means the lender should have carried out a thorough credit report on you before you borrowed money. It also means that it shouldn’t have been unreasonable to expect you to pay the cash back.
In line with FCA regulations and the definition of a payday loan, you should be reasonably expected to be able to pay back anything you owe by your next payday. That’s taking into account any outgoing bills and the cost of living.
If this wasn’t the case, and you found yourself needing to borrow more to pay back a rising debt, you may be entitled to compensation.
With this introduction out of the way, it’s time to look at how to claim back on payday loans from any applicable UK lenders.
Step 2: Check You Can Claim from Your Lender
Unfortunately for many borrowers, plenty of payday lenders have since ceased business. This may have been as a result of the FCA crackdown – but in any case, if the firm no longer exists, you won’t be able to claim money back.
Here is a list of the leading payday lenders whom you will still be able to make a compensation claim with:
- Mr Lender
- Pounds to Pocket
- Moneybox 247
- Payday UK
- Safetynet Credit
- Lending Stream
- The Money Shop
- Payday Express
Lenders such as Wonga and Wageday Advance have slightly different processes. If you want to know how to claim money back from payday loans from these lenders, it is worth looking for their public notices on such matters.
Step 3: Set Your Expectations
Regardless of the financial difficulty you might have suffered, you may only be able to claim back a certain amount of money. Therefore, it’s good practice to set your expectations before you start writing to your lender.
There are tens of thousands of unaffordable loan complaints lodged every year. Across most cases, the Financial Ombudsman will agree that a lender should offer you money back on interest you paid after your fourth or fifth loan. If you borrowed a lot of money, you may be able to roll back to your second loan.
It’s basically judged on whether or not the lender was justified in lending you more money. If it seems irresponsible that they kept letting you borrow just to pay off interest, you could be able to claim money back. After all, a payday loan is, in definition, supposed to be paid back after one calendar month!
Step 4: Get Your Facts Straight
This goes without saying when it comes to any complaint. Before you demand that a lender pay back any interest you cleared, make sure you get any loan or relevant bank statements together so that you can back up your concerns.
Providing you can make a good case for why you feel you were offered an unaffordable loan, you should be able to claim directly from your lender. Before you make your case, have all of the relevant information below to hand:
- A list of any and all loans you took out
- Your income and expenses per week (that’s including utility bills and living costs)
- Why you were unable to pay back new repayment requests (likely as a result of increasing interest)
You are essentially looking to prove to a lender that their rates were unreasonable given your financial situation. It’s in the FCA’s ruling that a lender should only have supported you borrowing money while you were physically able to.
Step 5: Write to Your Lenders
Now’s the time to put pen to paper. Make sure you have all your data to hand and either write via post or email to your specific lender. You’ll also need to clearly state that you wish to complain as a result of being given an unaffordable loan or loans.
Simply request that you be refunded any interest and extra charges you paid on top of the loan (which could include PPI) and that your loan is removed from your credit report. You should also consider appealing for the 8% interest charge that the Ombudsman would otherwise apply.
Making sure your lender understands your request for credit report amendment is very important. Your credit history could be adversely affected for years to come, and it may not even be your fault! Whether you have taken out multiple loans or have had difficulty keeping up with interest on just one, you simply need to offer your lender the facts.
Step 6: Play the Waiting Game
You’ll need to wait up to eight weeks for your lender to reply. This is within Ombudsman guidelines – and it’s so they have a chance to investigate your claim thoroughly.
If, after the eight weeks, you receive a rejection letter/email or an offer of compensation that falls short of what you expected, you don’t have to accept. You are well within your rights to contact the Financial Ombudsman after this time period has elapsed. The Ombudsman, or FOS, will take your case on if, after eight weeks, the lender has not resolved your complaint to your satisfaction.
Step 7: Contact the Financial Ombudsman
You may not even need to go this far. If you do, however, don’t be scared! The FOS rules in favour of the complainer more times than you may imagine. Providing you have your facts and details clear and correct, and you advise the FOS why you feel your complaint has been handled poorly, you may stand to get your full request reimbursed.
Contacting the Ombudsman is free. Once you’ve referred your case to them, a case investigator will look at both sides of the query and will make a decision in writing to both you and the lender. There’s no need for any formal hearings.
If you’re successful, the FOS will let you know how much you are to be awarded, and how the lender involved must act. If they rule in favour of the lender, your complaint cannot be taken further.
How Successful are Payday Loan Claims?
If you were genuinely unable to pay back loan amounts to a lender as a result of interest rates – or if you were not earning enough money to keep up repayments – you may be entitled to full compensation. However, each case will vary.
In any case, don’t panic. Once you know how to claim back on payday loans, all you have to do is write to the right people and collect all your relevant financial data together. My advice would be to stop asking yourself ‘can I claim back payday loan interest’ – and start getting in touch with any lenders you borrowed from asap. You have nothing to lose and may well end up with an unexpected windfall!