Discretionary Commission Arrangements - Compaints and refunds


Now in Administration

Ferratum were founded in 2005 in Finland, have since expanded, and now operate in 25 countries. In the UK, they are an online direct lender of short-term/payday loans - they also refer to them as 1-month loans, microloans, cash loans, fast loans, same day loans and quick loans under Loan Products on their website. They are authorised and regulated in the UK by the Financial Conduct Authority.

As I write, (November 2021), Ferratum have an alert on the home page of their website, stating that they have had to “place a pause on all lending activities” – this is apparently due to COVID-19, and they do not feel that lending at this uncertain time is “responsible”.

When they are actually lending, Ferratum promote themselves as a responsible lender, and claim that applying for their short-term loans is a simple experience as they use “technology” to achieve this.

Ferratum’s loans allow the customer to choose to borrow from between £300 and £1000 (up to £700 for new customers), and the repayments can be spread over 2-4 months. It’s actually quite confusing on their website, as under Loan Products, as mentioned above, they have all these different loan names, but as far as I can see, they are all the same type of loan. In another area of the website, they also refer to Plusloans – these, it seems, were introduced due to customer responses as to how they could improve their service (larger loans over a longer period) and so Plusloans were created, allowing borrowing of £300 to £1000 over 2-4 months. Sound familiar? Yes, the same amount and repayment time as for all their other loan types (which are actually all the same!). Hopefully while they are not lending, they will get someone to revamp the website and consolidate all the information that is on there, as its quite confusing to know what their products are, and how they differ (if they do at all).

More about Ferratum’s short-term loans

To apply for a loan, the minimum requirements are that the potential borrower is 23 or over, employed (no minimum salary mentioned), have a UK mobile number and email address, is able to show a good credit history, and has a bank account and linked credit card (not sure that this shouldn’t say debit card but that’s what it says). They then run credit/affordability checks, and within “seconds” apparently, are able to determine the suitability of that person for a loan. If approved, the money is then credited to the borrower’s bank within one hour. Interesting to note that if it is a repeat customer, they can apply for a new loan by text – I wonder if the same “affordability” checks are as thorough with a repeat customer.

Ferratum’s representative APR is 1270%, with a daily interest rate of 0.8%.

Based on this, if a borrower was lent £400 for 4 months with a fixed annual interest rate of 292%, they would have to repay four installments of £166.37, with a total repayable amount of £664.48.

Acknowledging that borrowers will encounter difficulties making repayments on time, they do try to offer reassurance that even though late payments will incur charges/interest, that this is capped by the FCA (Financial Conduct Authority) at 100% - so if you borrowed £300, you would never pay back more than £600 – thank goodness the regulator has set this cap!

Problems/Complaints with Ferratum

As with the majority of complaints made about short-term/payday loans, Ferratum have been hit with affordability and irresponsible lending complaints, with customers seeking a refund on the interest or charges they had to pay. On their website they include all the warnings that they are obliged to as a responsible lender; “It's also important to remember that our short-term loans are only to be used for short-term financial needs and should not be used as a long-term borrowing solution, or if you are in financial difficulty” is a good example of one such warning. However, it is clear from complaints made that if a potential borrower ignores these warnings and makes an application, that Ferratum willlend. They advise: “Please consider your ongoing financial circumstances when deciding to apply for a loan”. I suspect that if someone is desperate for a short-term loan (probably meaning that they have a poor credit history/score or their circumstances have changed and they need a quick cash injection), the “consideration” aspect will be pretty much ignored – it is too soft a directive to be effective, and it’s more likely that the potential borrower will feel that such a loan is there only way out of financial dire straits, and that they will worry about paying it back further down the line.

What is an Affordability Complaint?

Many borrowers are under the impression that, just because they managed to repay a specific loan, it was affordable. This is not the case if making the repayments led to the borrower being so insolvent that they had to borrow again, either from the same lender, or from another. It is dismaying to know that many people who have a short-term loan have them with multiple companies, despite evidence of these multiple loans being easily available to new lenders making a decision.

The FCA states that, “the borrower should be able to make the required repayments without undue difficulty, whilst continuing to meet other debt repayment obligations and reasonable regular outgoings.”

This means that a short-term loan is only affordable if the repayment was made on time, and you still had enough left in the bank to pay your other bills or debts.

Ferratum (and other lender’s) short-term/payday loans, are designed to be used to solve a short-term problem. If a borrower keeps rolling over a loan or repaying one and then taking out another loan almost immediately after, then this should send warning signals to the lender, and they should stop lending, and not continue to allow customers to get into even more debt. Sadly, it that appears that the daily interest of 0.8% is too tempting for lenders such as Ferratum to ignore.

Many affordability complaints are rejected by Ferratum, and customers can choose to escalate their case to the Financial Ombudsman Service or use a claims management company like Redbridge Finance who will deal with Ferratum and then the FOS if Ferratum do not uphold the complaint.  The following comments are from real customers who have struggled to get Ferratum to acknowledge their complaints: “They do not check your financial stability and they do not check your records. At time of loan, I was unemployed and homeless. Stinks. Financial Ombudsman now involved”

“They will constantly offer you more money. Do not do proper credit checks and fail to provide service they should offer and do due diligence. Had to put in an affordability complaint due to not following guidelines”.

“Good company, lends to me and I don’t work didn’t ask for wage slips either irresponsible lender”

“I put a claim into this lender for a chain of 17 loans in a row with interest of over £1,200. The chain was unbroken I had numerous payday loans with other lenders at the same time. I provided evidence of this through both my credit report and bank statements but still they refused to class this as irresponsible lending”

“The FOS have reviewed my case and have upheld loans 4-19 they have given Ferratum until 04/02/2020 to respond I fully expect them not to agree with the decision and that it has to go to the next level”.

“Complaint has been reviewed by an adjudicator at FOS who found that Ferratum were irresponsible in lending to me for 15 loans”.

Redbridge Finance Ltd have had many successful refund/compensation wins for customers of Ferratum and continue to do so. They are regulated by the FCA, and never ever charge an upfront fee.

Redbridge Finance claims experts can take on your case and make a claim for a full refund of all the interest and charges that Ferratum have charged. If you want to make a complaint against Ferratum, the process is very straightforward. All you need to do is sign up on our site and let us know which lenders you want to make a claim against. We then assess the information you have provided and take your claim forward by making a complaint on your behalf. We deal with the responses Ferratum, and of course will keep you informed every step of the way.

If you have had problems repaying your loan or think you might have been mis-sold a loan, then you could be entitled to a refund. Contact us today by going to www.redbridgefinance.co.uk and signing up, and we can assess if you have a claim.