In October 2014, Wonga agreed to refund over 330,000 people for payday loans that they had taken out, following this, in July 2015 Cash Genie is understood to have written off £10m of fees and interest and will pay a further £10m in compensation to their customers.
Payday loan companies did previously provide people with emergency funds to cover bills when cash was running short during the recession period, it now transpires through reports unveiled that payday lenders may not have followed correct process when authorising loans to their customers.
In April 2015 the BBC published an article entitled ‘Will Wonga and other payday lenders Survive’ based upon their publication of their 2014 financial losses of £37 million, once again highlighting the challenges now faced to payday lenders that previously in 2012 had reported pre-tax profits in excess of £84.5 million. In the article the, BBC drew particular attention to the new measures introduced by the regulator Financial Conduct Authority to cap default charges to £15 for those who could not afford their repayments to their lenders.
Even as far back as in 2011, the financial website ‘This is Money’ reported a harrowing story of one female lender who found herself in debt to the tune of £2,751 with little or no way to repay her payday loan which was accruing interest at an extortionate rate. In her case, the lender refused to freeze interest regardless of her contacting them to plead her position. The story of this desperate customer is representative of a much bigger problem in an industry that is now worth an estimated £1 billion. The stress of the phone ringing, or the knock at the door provides many customers of payday loans the ongoing concerns that often result in a poor quality of life. This has now been recognised by the regulatory authorities who are keen not only to stamp out what could be deemed as ‘loan shark’ behaviour but also that interest rates which often exceed 4000% are unacceptable and need to be reduced with immediate effect.
The most recent regulations from the FCA (Financial conduct authority) and guidance from the Financial Ombudsman now mean that stories like the lady mentioned above are becoming less common, that said, there is still a large number of payday loan customers who may be entitled to a refund on the interest paid and possibly even compensation.
So, what should the lenders be asking when you apply for a payday loan? There are several key pieces of criteria, largely surrounding your ability to pay back the loan. Affordability is a major issue when looking at the process that should be carried out by payday lenders when assessing the ability to repay a loan. Ultimately, it is the responsibility of the lender to check your suitability for a payday loan and if they have failed to have done so when considering your application then you may be entitled to a refund or compensation, even if you have already paid it back!
Here are some questions to ask yourself when you applied for a payday loan:
– Did the payday lender didn’t check your credit record before authorising your loan?
– Have you needed to repeatedly roll over a loan as you couldn’t afford to pay the first one back?
– Have you needed to take out numerous loans from the same provider just to make ends meet?
– When you took out the loan, could you afford to pay it back? You need to consider your food, rent, bills, gas and electric in this. If you couldn’t pay it back then the lender should have checked first.
– Have you been receiving continual calls and messages from the payday loan provider seeking repayment even though you can’t afford to make them?
In December 2014 there was an official ruling from the Financial Ombudsman ruling in the favour of a customer of wonga.com which meant that the loan he took out needed to be refunded! It was a landmark decision which has now opened up the possibilities for others that were in similar positions. Such decisions will hopefully pave the way for those that have taken out short term, payday loans to seek their refunds and compensation for the way in which their accounts have been handled by the payday lenders.
If you have taken out a payday loan you may be entitled to a refund or compensation. The Citizens Advice Bureau of the UK process tens of thousands of similar enquiries each year and can also offer free and impartial advice.
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