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When payday loan company Wonga went out of business, there was a conspicuous lack of mourning for it.  At best, there was a slight degree of sympathy for the ordinary workers who stood to lose their jobs.  It’s easy to see why all concerned (meaning the media, the public and politicians), would feel this way.  After all, Wonga’s business model was hardly endearing.  Unfortunately, however, Wonga failed because it managed its business badly, not because it lacked customers.  Many of its former competitors are very much still in business and some appear to be working hard to take over the space left by Wonga.  Not to put too fine a point on the matter, the law of supply and demand means that payday loan companies and their ilk will probably be around for as long as there are people desperate enough to use them.

A bigger concern is for those people, swayed by the availability and ease at which money is offered, particularly those, young, vulnerable or suffering from mental health issues. What can you do if you feel you’ve been enticed?

Sometimes the law can help

In principle, if you can demonstrate that your lender offered you a loan which you could not reasonably have afforded to repay without hardship, then you may be able to claim at least some of the money back.  There are, however, several problems with this.

It is a may rather than a will

Even if you meet every criterion for a refund, you will only get the money to which you are legally entitled if your lender is still in business.  This is actually a very serious consideration.  If a company offered an unaffordable loan to one person, then it is at least within the bounds of possibility, if not probability, that they offered unaffordable loans to other people as well.  If only one person complains then the company may just take the hit and move on.  If, however, multiple people complain, then the company directors may decide (or be forced) to cease trading and simply pay as many claims as possible out of their remaining funds.  This is basically what happened with Wonga.  Its aggressive lending practices led to it being deluged with claims for refunds, but the company’s profits had already been distributed to its investors and hence the company itself had insufficient funds to pay its newly-discovered debts.  Wonga is still in the process of being wound up and is, at least in theory, still accepting claims for unaffordable loans (until 30th September 2019).  In practice, however, it remains to be seen whether or not anyone will receive any refunds for them and even if they do it seems reasonable to assume that they will only receive a percentage of what they are owed – and that percentage may be very low.

You may have to settle for only receiving some of your money back

Even if your lender remains in business, it is possible that you will only be awarded part of the money you spent on fees and charges.  While this is, of course, a whole lot better than nothing, it’s even better yet to manage your finances so that you never have to resort to high-cost credit, even in emergencies.

You will still be without the money while you go through the claims process

If you do put in a claim against your lender, you may find yourself discovering that they are a whole lot quicker to chase up debtors for money they are owed than they are to respond to claims raised against them.  If they exceed regulatory timeframes for a response, then you may be able to take action against them.  If, however, they simply take the full length of their allotted time to give you a response, then that is entirely their prerogative.  It may be bad customer service, but it is not a regulatory breach.

In short, while it may be advisable (and satisfying) to take action against these companies if you can, it’s usually a whole lot more advisable to avoid having dealings with them in the first place.

If you do need financial help and advice please contact us.

Blackpool: 01253 299 399 | Carlisle: 01228 558 899