This guide explains all the steps you will need to take to apply for a payday loan refund from Wonga, Swift Credit, Mr Lender, Lending Stream, Payday UK, Quick Quid, Wageday Advance, My Jar, Satsuma, Sunny, Uncle Buck or any other payday lender.
The 6 steps to get a payday loan refund
Step 1: Check you can make a claim for payday loan refunds
To make a claim against the payday lenders, you need to show that the loans could not be repaid without 'undue difficulty’.
The technical stuff:
The regulator of payday lenders, the Financial Conduct Authority (FCA) states:
"The lender must make a creditworthyness assessment and the assessment should include the lender taking reasonable steps to assess the customer's ability to meet repayments in a sustainable manner without the customer incurring financial difficulties or experiencing significant adverse consequences."
The regulations also state:
“sustainable” means the repayments under the regulated credit agreement can be made by the customer:
(a) without undue difficulties, in particular:
- (i) the customer should be able to make repayments on time, while meeting other reasonable commitments; and
- (ii) without having to borrow to meet the repayments;
In plain English this means:
1) Any payday loan you took had to be affordable.
2) So you should have been able to repay it the following month and be able to pay your rent/mortgage, bills, food, transport and any other debts.
Basically a payday loan should be a one off, or very infrequent at worst. To comply with the regulations it also had be affordable to repay in full when you next got paid.
If you had to borrow again, kept on borrowing more, you were late making payments or could not make other payments then the payday companies were lending irresponsibly and they should not have given you a payday loan, and YOU COULD BE ENTITLED TO COMPENSATION.
Step 2: Get the facts on how many loans you took and when.
If you think you were treated unfairly by a payday loan lender or lenders, you need to get a list of your loans together.
You may be able to get this from your online accounts with the lenders themselves, your bank statements or credit report.
Step 3: Build your case for unaffordability.
If you build a strong case as to why your payday loan was unaffordable, then hopefully the lender should settle with you without you having to go to the Financial Ombudsman.
This will dramatically cut the time it will take for you to get your compensation, so it's well worth putting the work in.
Once you have got a list of all the payday loans you took out.
You now need to detail your income and expenses.
So you now need to list the amount you earned each month/week.
Then list all your expenses: your rent, council tax, electricity and gas, broadband and telecoms, insurance, transport costs, supermarket shopping, clothing, childcare, other debt payments etc.
Step 4: Write your letter/emails to each lender.
Once you have got a list of all your loans and have completed your income and expenditure details you can submit your claim/s to the lender/s.
Write a letter or email to each lender saying that you wish to complain that you were given "unaffordable loans".
Don't worry, you don't have to be Perry Mason or Harvey Specter.
Just ask for a refund of all interest and charges you paid on the unaffordable loan (plus the 8% statutory Ombudsman interest on top), and also ask for the loan to be deleted from your credit record if it’s still on there, as this could be harming your credit score and severely damage your chance of getting credit in future.
Step 5: Wait up to 8 weeks.
Sad but true.
The payday lender has 8 weeks to reply to your claim.
They often reply with a rejection letter or a very small offer of compensation.
Don't always accept their offer, especially if you paid a lot more in interest than they are offering you back.
A common technique the payday lenders use to reduce the amount they have to pay out in claims is to offer a ‘gesture of goodwill’.
For instance you may receive an offer letter back within a few weeks offering £400 for example. In most cases the complainant will think they’ve hit the jackpot, sign the forms which legally closes the case and take their money.
Make sure you get the full amount of compensation, you should get a full refund of interest and charges paid plus statutory interest of 8%.
If you are given an offer, you may think you might lose lose it if you don't accept or refer your case to the Ombudsman.
This does not happen, so if you get an offer, sit back and think about whether it's enough before you sign anything.
Even if they send you a letter of rejection, don't give up.
If the payday loan company fails to resolve your complaint by offering a fair amount of compensation, you have the right to take it to the Financial Ombudsman service eight weeks after first raising the issue.
Step 6: Refer your claim to the Financial Ombudsman (FOS).
Now we are calling in the big guns.
If you are not happy with your offer of settlement, your claim has been rejected or the lender failed to write back to you at all, you can forward your case to the Financial Ombudsman.
The Financial Ombudsman Service is free for you to use and details of the ombudsman should be listed in your provider's final letter.
If you have more than one lender, then put in a separate complaint about each lender.
An adjudicator from FOS will investigate your complaint and reach an opinion based on all of the information.
The FOS will look at the evidence provided by both sides. They might contact you for more information, but there isn’t a hearing.
Once the FOS has made its decision it will write to you and the company with details of the ‘award’.
If the award is in your favour (they agree with your complaint about the payday lender), this letter will include details of what the company must do to put things right.
How much payday loan compensation will I get?
If your claim is "upheld" you should get a full refund of interest and charges paid plus statutory interest of 8%.
This can amount to quite a lot of money, we've had people receiving over £6000 in compensation. So if you're entitled it's well worth making a claim.
On top of this, “unaffordable” loans will also be deleted from your credit record.
Free Check To See If You Can Claim
How Much Can I Claim?
Our claims specialists can quickly tell you if you have a valid claim and the amount you are likely to receive back. Simply click the "How Much Can I Claim" button, complete the form and see how much your claim is worth.