Last week, the Financial Ombudsman Service released the results of its annual review of the 2015-2016 financial year. The government body received more than 340,000 complaints from consumers regarding an array of financial products and services. The complaints varied from payment protection insurance (PPI) to payday loans.
In fact, according to the report, the number of complaints about bad credit loans nearly tripled in the past year, even with tougher regulation implemented by the Financial Conduct Authority (FCA). Complaints about payday loans skyrocketed 178 percent from 1,157 to 3,216.
Although it is a concerning number, officials say this is actually a positive sign because it suggests that consumers are more aware of their rights and the rules set in place by the state.
British newspaper The Mirror released a new report that suggested millions of Britons could be in line for compensation if they had taken out a payday loan from the likes of Wonga, Sunny, The Money Shop and Quick Quid. You may be wondering how it works.
First, did you repay the principal amount without any “due difficulty? In other words, you paid back the payday loan, plus the interest and other fees, without resorting to borrowing funds to repay that amount. If you didn’t then you will not be eligible for compensation. However, if you did have a difficult time then you could be paid back a certain amount from payday loan stores.
In addition, if you inform a payday lender that you’re struggling with your bad credit loans then they have a legal responsibility to treat you fairly and provide you with other options. One of them is to provide you with information regarding free debt advice services, including Money Advice Service and Citizen Advice. The stores are also prohibited from selling you additional loans if you’re already having a difficult time with your initial loan.
The report suggests that you could be compensated all of the interest you paid on the loan, all of the charges you paid and an additional statutory interest rate of eight percent. You could also apply for a refund from the loans you already paid off, but the request must be made within six years of taking out the loan. Finally, you can ask for the payday loans to be removed from your credit record and request that the stores cancel the remaining balance.
Now, you have two options to request compensation: contact the payday lender in writing or contact the Financial Ombudsman Service.
This isn’t the first time that borrowers have been given a refund. Late last year, approximately 147,000 payday loan customers would be compensated more than $22 million because of “a number of serious failings” that “caused detriment for many customers.”
As part of an investigation by the FCA, officials discovered that Debt Financial made mistakes, had faulty debt collection practices and failed to conduct affordability checks.
“The FCA expects all credit providers to carry out proper checks to ensure that borrowers don’t take on more than they can afford to pay back,” FCA’s Jonathan Davidson said in a statement at the time. We are encouraged that Dollar is committed to putting things right for its customers.”
In the end, 65,000 customers would receive a cash refund, 67,000 customers would have their loan balance reduced and 15,000 customers will be given cash and have their loans lowered.