What is a Debt Relief Order and how does it work?
Find out which debt solution is right for youGet started
Answer a few simple questions
See if you are suitable
Understand your next steps
There have been some changes in the way that payday lenders are allowed to operate, meaning some people might be due a refund. Find out what they are and how they could affect you.
You may have seen in the news recently that Dollar Financial UK, the company that controls payday lender The Money Shop, has been ordered to repay £15m to customers due to system errors, as well as not carrying out proper affordability checks and debt collection practises.
After looking into the company, the Financial Conduct Authority, which is responsible for regulating lenders, found that customers were being approved for loans who could not afford to pay them back and that 147,000 of their customers were due a refund. Dollar will hand cash back to 65,000 customers, and cut the balanced owed for a further 67,000 customers.
Similarly, the owner of the Quick Quid and Pounds to Pocket lending brands has agreed with the FCA that they will pay 3,940 of their customers £1.7million in compensation due to problems with its lending criteria. 2,523 people will have their loans written off entirely.
Crack down on payday lenders
Recently, the FCA has been taking a close look at how some payday lenders operate, and there have been some changes in the way that they must operate. Previously, there was no limit to the amount of interest that these companies could charge customers. However, they are now not allowed to charge more than 0.8% per day in interest. No customer can be expected to pay back more than twice what they borrowed in the first place, and if you default on one of these loans then the one-off fee that you have to pay cannot be more than £15.
These latest compensation announcements follow on from the FCA’s investigation into two other payday loan companies; Wonga and Cash Genie. In 2014 Wonga said that they were going to write off customers’ debts of up to £220m as a result of the FCA’s findings. Cash Genie was ordered to pay £20m in compensation to certain customers after they were wrongly charging them £50 for being transferred to their collections department.
List of Payday Companies
In case you’re unsure whether or not you actually have (or had) a loan with Dollar Financial UK or CashEuroNet UK here is a list of the brands that they use:
Pounds to Pocket
The Money Shop
What should I do if I have a loan with one of these companies?
Not everyone who has had a loan with one of these companies is entitled to compensation, however there is a chance that you may be and it’s worth looking into. If you had a loan with The Money Shop, Quick Quid or Pounds to Pocket then you don’t have to do anything to get your compensation – they will contact you and let you know if you are one of the customers they need to redress.
If you had a loan with another payday lender and you’re not satisfied that they gave you all the information they should have, or checked properly that you could afford the repayments, you are able to complain. Look at The Citizens Advice for a full list of reasons to complain, and how you should go about doing this.
What happens if I’m in a debt solution already?
When you’re due money back the creditor can choose to send the money straight to you or, if you still owe them money, then they can choose to simply take this amount off your balance so you owe less or it clears the debt.
If you receive a refund and you’re already on a debt solution then whether or not you get to keep the money depends on the type of solution you’re using. If you were on a Debt Management plan then there would be no need to pay the refund in. If you were on an IVA then it would be classed as a windfall, usually so as long as it was under £500 then you’d get to keep it and if you had gone down the bankruptcy route then it would almost certainly need to be paid in.
You may be wondering how it would affect your DRO if you got a refund because you cannot have more than £50 disposable income every month to qualify for a DRO. However, as long as the refund was under £700 and it was less than 50% of the debt then the DRO would usually be allowed to continue and would not be revoked.
The most important thing to do is let whoever is managing you solution know if you receive a refund. They will be able to advise you on the best course of action and whether you get to keep the refund.
by Christine WalshBack to blog home