Have you taken out a payday loan? Here’s how to claim a refund

Wonga has already paid out to customers whose loans were deemed unaffordable.

Wonga has already paid out to customers whose loans were deemed unaffordable.

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The Financial Ombudsman Service has published its annual report and revealed that complaints about payday lenders have tripled in the past year.

One of the most significant areas of complaint is customers looking for a loan refund. Some lenders, notably Wonga, Sunny, The Money Shop and Quick Quid, have already paid out to customers whose loans were deemed unaffordable. But just what does unaffordable mean? And when can you make a claim?

Could you repay ‘without undue difficulty’?

The key point to consider if you think you are eligible for a refund of any part of a payday loan is whether you could repay it without ‘undue difficulty’. In this case, that means you repaid the loan – in full – on time and without resorting to borrowing more money to cover it off.

So if you had to roll over loans, borrow from one lender to repay another, or ended up taking out multiple loans, then you could well be eligible for compensation.

Unfair treatment:

If you tell a lender that you’re struggling with the loan, they then have a responsibility to treat you fairly. They should inform you that there are free debt advice services such as Citizen Advice or the Money Advice Service. Payday lenders should also not use the fact that you’re struggling as an opportunity to sell you more loans.

How much to ask for:

You should be able to get back all interest you paid on the loan, all charges and an extra statutory interest rate of 8 per cent. You can also request that any loans deemed to be ‘unaffordable’ are removed from your credit record. Finally, you can request that they cancel any remaining balance.

You can also claim a refund from loans you’ve already paid off, as long as you raise the case within six years of taking out the loan.

How to get your dues:

The first thing you need to do is to make sure you know precisely how much you borrowed and how much the repayment cost you. Next, you need to write to the lender. Finally, if the lender does not offer you compensation, you can take the case up to the Financial Ombudsman Service eight weeks after you’ve first raised it with the payday loan company.

Payday loans are a controversial and potentially very expensive form of borrowing, yet in times of heavy financial pressure – such as just after Christmas – many people with a poor credit rating may find it’s the only option

But with rules in force since January 2015 that put caps on interest and other charges, borrowers should find payday loans a potentially cheaper option.

Payday lenders, like the rest of the financial services industry, are regulated by the Financial Conduct Authority, an independent body that is paid for by charging fees to the members of the industry.

The rules

1) Lenders are limited to a cost cap of 0.8 per cent of the total amount borrowed per day. This includes both interest and any other fees.

2) Lenders are also banned from requiring borrowers pay back more than 100 per cent of the amount borrowed – this is intended to stop debts spiralling out of control.

3) A new fixed fees cap means those struggling to repay on time will never face a default charge in excess of £15.

Who do I complain to?

If you’ve taken out a loan and you feel its terms do not adhere to the new FCA rules, then you should raise the issue with the lender via resolver.co.uk.

If the payday loan company fails to resolve your complaint, you can take it to the Financial Ombudsman service eight weeks after first raising the issue.