Tel: 01284 724 651

Payday Loan Compensation

This is a big subject that is going to grow and grow over the coming months and years.

Should people who took out payday loans have the right to claim compensation when they believe that they have been mis-sold the loan? If the lender kept to all the rules and regulations should they be forced to investigate complaints when they have done nothing wrong?

Many people took out payday loans between 2007 and 2014 (when the new laws came into effect to protect consumers), and many of them were not treated fairly by the lender. What happened a lot was that customers would borrow, say, £500 and were expected to repay the whole lot, plus interest on their next pay day. The interest could be a lot, sometimes up to 30%. So, a borrower could be in the position to have to pay £500 + 30% (£150) = £650 on their next payday. Now, being sensible, if a person needed to borrow £500 it is unlikely that they are going to have £650 on their next payday.

So what happened was that the customers would take a "roll over", or an "extension". They would pay just the interest of, in this case, £150. They would then be in the same position the following month and so on. Sometimes people rolled loans over many, many times, possibly up to 18 times.

For a good example, let's say someone borrowed £500 and rolled over, say, ten times. They would have paid 10x £150 = £1,500 in interest alone!

Now in this example, I would suggest that the customer has every right to say to the lender, "hey I was dependant on that loan, I could not survive without it, and you knew this, yet you did nothing to help me." I believe that the borrower would be entitled to seek payday compensation for the loan being unaffordable and them being in financial difficulty. The lender should have done something to stop the customer staying in a cycle of debt. It was easy for banks just to allow the borrowers to roll over and keep paying the monthly interest.