Mis-sold Wonga customers have been legally robbed. Over 350,000 former Wonga customers, who were mis-sold payday loans, have received letters telling them they’ll receive a paltry 4.3 per cent of what they were owed after it went into administration.
So, this is a wake-up call for anyone who may have been mis-sold a payday loan - DON’T WAIT to check if you’re due £100s or 1,000s, or it could be too late…
Why have Wonga customers received so little?
Wonga customers who were awarded payouts having been mis-sold their loans, are only getting 4.3p per £100 owed. In other words, due £2,000, get just £86. I and others long campaigned for payday loan regulation, but when it came in 2015, that was far too late. These vultures had preyed on and profited from the vulnerable with impunity for years. Then when regulation finally came, enabling people to reclaim, some of these international firms declared their UK arms bust, so they weren’t liable, likely leaving some of the founders sitting on cushions of cash powered by usurious profits. Yet ultimately, legally, UK Wonga doesn’t exist anymore - it’s a dead company. So (oversimplifying a touch) the administrators simply add up its assets and share them among those it owed money to - including those due mis-sold money back. Ultimately, I suspect the only thing you’ll be able to do now is spit, swear, stamp your feet then get on with life.
If you’ve been mis-sold put in a claim urgently
Many of these firms are going under due to a combination of the regulation cutting profits and them paying the price for mis-selling so many loans. If you were mis-sold a payday loan by a firm that is still solvent, you get the full amount back. But if it goes bust, you’re just one of the creditors, and will be lucky to get a few pence per pound – just like with Wonga – other’s that are already bust include QuickQuid, Piggy Bank and Wage Day Advance.
How to check you were mis-sold
Payday loan firms should have done a number of checks to ensure the loan was appropriate, if not you were mis-sold. For example…
It didn’t examine your finances to ensure you can afford the loan and fees. For instance, you shouldn’t be given a £1,000 loan if you only earn £500/month.
It wasn’t clear how much it would cost you in total to repay the loan.
You weren’t given full or accurate information about how and when to pay back your loan.
It didn’t tell you that a payday loan should not be used for long-term borrowing or if you are in financial difficulty.
You weren’t told what to do if you have a complaint.
If you were mis-sold then you are due back all the interest, fees, charges and eight per cent per year statutory interest on top since you took it out. This can be large as Paydayloanalice said: “I followed Martin’s advice after getting 16 payday loans in 2yrs. I received Lending Stream’s refund and got over £1,600. This has allowed me to pay off a credit card, so I’m looking forward to less stress”.
You can claim on existing loans and loans you’ve already paid off, usually as long as you raise the case within six years of taking out the loan. My www.mse.me/reclaimpaydayloan guide has free help and a tool, or just write to the lender yourself explaining why you think you were mis-sold. And if the payday lender rejects you, take your case to the free www.financial-ombudsman.org.uk – over 60 per cent of people who have, won.
Payday loan alternatives Payday loans are a flawed concept for most. How many in dire need would see such an improvement within a month that they both don’t need to borrow again, and could repay last month’s loan plus huge interest? Yet there can be short term emergencies where some need to borrow. Always minimise the amount you borrow, ensure you can afford the repayments, and repay as quickly as you can (without killing your finances). Here are some options…
1. Check out a credit union. These are independently run local non-profit organisations which assist people who may not have access to financial products and services elsewhere. Find if there’s one for you at www.findyourcreditunion.co.uk. Loan rates are capped at 43 per cent rep APR.
2. Use an existing credit card provided you can fully repay it the next month. If you spend on a credit card this month, you’re billed the next month, and provided you can clear all the debt there’s no interest. So, if you’re looking for a one-month respite, it works. Even if not a costly credit card still tends to be cheaper over a month than a payday loan or if you can get a 0 per cent for purchases card mse.me/purchasecard
3. Ask family or friends for help. It may be tricky, but it may be worth asking for help, even if it’s just going around for dinner or babysitting children to help save on costs. Plus, often talking about your money problems can be a huge relief. Though think carefully through the pros and cons of this – especially if it puts you in someone’s debt that they may use it as leverage over you.
4. Check if you’re eligible for a loan from the Government. Those on some benefits meeting stringent conditions may be eligible for an interest free loan of up to £800, it’s worth checking www.gov.uk/budgeting-help-benefits - but don’t expect it.
5. Get non-profit debt counselling help. If you’re really struggling with money then you need one-on-one debt counselling help. Book an appointment with either citizensadvice.org.uk, capuk.org, stepchange.org or nationaldebtline.org. They’re there to help, not judge. The biggest message I get after people go is “I finally slept last night”.