Payday loan customers who have fallen victim to unaffordable interest rates will receive payments in their bank accounts starting today.
Cash transfers are being sent as compensation to thousands of Money Shop, Payday Express and Payday UK customers – but payouts can be much lower than expected.
It is part of a Scheme of Arrangements with the parent company of the three lenders, Instant Cash Loans (ICL).
Borrowers will receive far less cash compensation than the amount loaned to them, as the £18 million made available by ICL is to be shared by nearly two million customers.
Debt expert Sara Williams, who runs the blog Debt Camel, said: ‘Some people get £50 but a lot are queuing for less than a five.
ICL stopped making new loans to borrowers in August 2018 and announced a compensation program for customers who were mis-sold before October 2019.
A first round of payments was sent to borrowers in May and June last year.
The second and last round of payments starts from today.
Borrowers must have submitted claims in the last year to be in line for money.
If your application has been accepted, the amount you will receive varies depending on the amount you borrowed.
For example, if you received £100 in May, you can get £15 now.
But the repayments are much smaller than what you borrowed.
Indeed, ICL agreed to pay only 4.31 pence for each pound borrowed in the first payment and 0.65 pence for each pound borrowed via the second cash sum.
Williams also warned borrowers to monitor their payment and alert ICL if they do not receive money by January 20.
After this date, ICL will go into liquidation and you will not be able to get any more money.
We’ve asked ICL for a comment, but haven’t received a response yet.
The cost of handling similar complaints caused payday lender Wonga to collapse in the summer of 2018.
A number of other leading companies, including QuickQuid and Peachy, also collapsed, leaving thousands of customers without full compensation for badly sold loans.
The city’s watchdog, the Financial Conduct Authority, has been urged to close the loophole to protect customers.
Williams added: “Prior to the start of the scheme, the Money Shop’s complaints handling was very poor, dismissing many complaints about affordability.
“Now people have had those rejected complaints upheld in the program, but they’re only getting 5% of the full refund they should have been entitled to.”
If you borrowed money from Provident, Greenwood, or Satsuma, here are your repayment rights.
And if you think one of the still-operating lenders may have wrongfully sold you an unaffordable loan, here’s how to file an affordability complaint.
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