Around 2008 the payday loans industry in the UK sprang up.It was an American industry that was moving over the Atlantic. In simplistic terms a Payday Loans are really good, you borrow a small amount of money and ready it when you are next paid, probably with a small amount of interest.
But unfortunately, the world is a greedy place, companies sprung up offering loans to consumers with really high interest rates, often 30% plus per month. Okay they are expensive, but if you needed £50 until the end of the month and ended up paying £15 interest, it was acceptable.
Of corse, things did not stay with people borrowing small amounts of money. The companies started to offer higher amounts of money. Companies such as Wonga started offering people up to £1,000 as a payday loan. Not surprisingly, people could not afford to pay back the £1,000 and the 30% interest (£300), so they were offered a "roll over”.
A rollover is where the customer pays only the interest at the end of the month and they defer the capital they borrowed. Often people would end of rolling over many times, possibly 10-12 times and they still owed the original £1,000.
Think about it, they could have borrowed £1,000 and paid 10 x £3,000 in interest payments, giving a total of £4,000 for a £1,000 loan.
Of course, what should have happened was that the lender should have realised that if the customer could not afford to repay the first loan they would be unlikely to be able to repay the subsequent rollovers. They should have assessed the affordability of each extension before granting it. If they had done this and determined that they customer could not afford to repay the loans they should have shown forbearance and treated the customer fairly as outlined by the payday loans regulator, the FCA.
This is where another claims management industry has started to spring up. Mis-sold payday loans. Redbridge Finance is one of these companies, we offer to help consumers claim back the interest they paid on unfair payday loan rollovers. We only focus on the roll overs and only look to see if they were the subject of irresponsible lending. We are not considering if lenders should not issued the initial loan, only the rollover.