PAYDAY loan customers who fell victim to unaffordable interest rates will receive payouts in their bank accounts from today. Cash transfers are being sent out as compensation to thousands of Money Shop, Payday Express and Payday UK customers – but the payouts may be much smaller than expected. It’s part of a Scheme of Arrangements […]
PAYDAY loan customers who fell victim to unaffordable interest rates will receive payouts in their bank accounts from today.
Cash transfers are being sent out as compensation to thousands of Money Shop, Payday Express and Payday UK customers – but the payouts may be much smaller than expected.
It’s part of a Scheme of Arrangements with the three lenders’ parent company Instant Cash Loans (ICL).
Borrowers will receive much less compensation cash than the amount they were lent, as the £18million made available by ICL must be shared out by almost two million customers.
Debt expert Sara Williams, who runs the Debt Camel blog, said: “Some people are getting £50, but many are in line for less than a fiver.”
ICL stopped dishing out new loans to borrowers in August 2018 and announced a compensation Scheme for customers who were mis-sold loans before October 2019.
A first round of payments were sent to borrowers in May and June last year.
The second and final round of payments start from today.
Borrowers must have submitted claims last year to be in line for cash.
If your claim was accepted, the amount you will get varies by how much you borrowed.
For example, if you got £100 in May, you may get £15 now.
But the refunds are much smaller than you borrowed.
That’s because ICL has agreed to pay out just 4.31p for every £1 borrowed in the first payment and 0.65p for every £1 borrowed via the second cash sum.
Williams also warned borrowers they must look out for their payment and alert ICL if they don’t get cash by January 20.
After that date, ICL will go into liquidation and you won’t be able to get the cash.
We’ve asked ICL for a comment, but haven’t received a reply yet.
The cost of processing similar complaints caused payday lender Wonga to collapse in summer 2018.
A number of other high-profile firms including QuickQuid and Peachy have also collapsed, leaving thousands of customers without full compensation for mis-sold loans.
City watchdog the Financial Conduct Authority has been urged to close this loophole to protect customers.
Williams added: “Before the Scheme started, the Money Shop’s complaint handling was very poor, rejecting a lot of strong affordability complaints.
“Now people have had those rejected complaints upheld in the Scheme, but they are only getting paid 5% of the full refund they should have been entitled to.”
If you borrowed money from Provident, Greenwood or Satsuma, here are your refund rights.
And if you think you might have been mis-sold an unaffordable loan by one of the lenders still operating, here’s how to make an affordability complaint.
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