Payday loan companies have hit the headlines again this week following the announcement that QuickQuid, the UK’s former leading payday lender, has entered administration.
Enova, QuickQuid’s owner, blamed regulatory uncertainty on its decision to cease trading. However, it is widely reported that QuickQuid were facing large volumes of complaints, as well as 24 Financial Ombudsman rulings in favour of consumers who had complained that they had been mis-sold loans.
Payday loan companies have grown rapidly in recent years offering quick or instant access to financial products, primarily loans and credit cards. However, these types of services have sparked controversy regarding responsible lending. Much of the criticism arises due to the high rates of interest applied; placing many vulnerable consumers into further financial hardship with little or no prospect of maintaining the repayments or clearing the initial debt.
Often those applying for such loans turn to payday loan companies when they are in financial need. For those with lower credit ratings, there is also often a requirement to secure the borrowing with a guarantor. Unfortunately, guarantors do not always receive adequate information from these lenders or fail to fully understand their obligations, or the risks involved.
It is therefore not only borrowers who have highlighted problems. We have received reports from clients that they have agreed to act as a guarantor for individuals but have later found themselves facing enforcement action following default by the principal borrower.
Recent statistics published by the Financial Ombudsman show that 83% of complaints made by guarantors had been upheld. Administrators for Wonga, who also entered administration last year, have also revealed that nearly 400,000 eligible claims had been made since its demise.
For those consumers affected or unsure where to turn next, help is available.
QuckQuid’s administrators have confirmed that an online portal will shortly be set up for claims to be submitted.
For any other consumer who has a complaint or is concerned that they may have been mis-sold financial products from any company, you should first request a copy of the relevant complaints procedure and make a formal complaint.
If the complaint is not resolved or you remain dissatisfied, you are entitled to refer your complaint to the Financial Ombudsman Service for consideration and investigation.
If making a complaint, it is important to note that any complaint must be made within 6 years of the problem occurring. Complaints should also usually be referred to the Ombudsman within 6 months of receiving a final response letter from the lender, otherwise it will likely be considered to have been made out of time and is unlikely to be considered.
For individuals who are concerned regarding their financial position, we would recommend that independent financial advice is sought at the earliest opportunity to avoid creditors taking enforcement action. If a County Court Judgment is entered, this will stay on the public register of Judgments for a period of six years, unless satisfied in full within one month, and will severely affect credit ratings.