Why was I given a payday loan I couldn't afford?

Payday Lending

Rik told us he was unhappy that, despite having a bad credit history, he’d still been able to take out a payday loan.

What happened 

Rik took out a payday loan to help pay some of his debts. Rik said that, while he’d needed the money at the time, his financial difficulties had just got worse – and he thought the lender should have done proper checks about his circumstances before offering him the money.

He had already complained to the lender, but they’d said they hadn’t done anything wrong. Rik then contacted us to look at his complaint. He wanted us to make the lender refund the interest and charges, which had increased the cost of his loan.

What we said

We also looked at the detail of Rik’s current loan and the information he’d given to the lender. Rik had borrowed £150, which he’d agreed to repay in one instalment, with interest, just after his next payday.

We asked the lender for more information about how they’d decided to lend to Rik. They showed us they’d carried out a credit check before offering the loan. They also showed us that they’d asked about his income and general living costs, such as housing expenses, bills and outstanding credit. Rik hadn’t mentioned he’d had any other loans – or credit problems – in the months before he’d asked them for the money.

Rik had told the lender his monthly income was £1,600, from which he had to pay about £700 a month in general expenses. The lender’s credit check hadn’t shown anything that we thought should have alerted them that Rik wouldn’t have been able to repay what he owed.

The amount Rik had needed to repay made up small proportion of his income – even when factoring in his living expenses. In our view, given the amount Rik had wanted to borrow and the information he had given the lender the checks they’d carried out were proportionate. And those checks had shown that the Rik should have been able to repay the loan in a sustainable way.

We explained to Rick that, based on what we’d seen, we didn’t agree the lender had been wrong to give him the money. So we didn’t think the lender should have to refund any money to Rik.