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common complaints and case studies

“Why was I given a payday loan I couldn’t afford?”

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

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

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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.

“I’m taking out payday loan after payday loan – and I can’t get out of my debt?”

Orla asked us to step in when her payday lender refused to help her with her debts. She told us she often had to take out a new loan soon after paying off the previous one, and was trapped in a cycle of debt.

Orla explained she’d already complained to the payday loan company – but they’d just said they hadn’t done anything wrong.

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We asked the loan company for the details of all of Orla’s loans. We also asked them to show us what affordability checks had been done for each loan.

From the lender’s records, we could see she’d had first taken out a payday loan seven years previously. Over the following years, she’d gone on to take out over 60 loans with that lender.

The lender told us they’d asked about Orla’s income and for some personal information – such as her residential status – at the point Orla applied for each loan. They also told us they’d carried out credit checks – and for some of the later loans, they’d asked about Orla’s living expenses.

We looked at Orla’s pattern of borrowing. This varied from month to month – sometimes, she’d borrowed as much as £600, but in other months it had been £50. Where there had been a gap between loans, it hadn’t been for more than week or so. It seemed to us that some of the smaller loans had been used as top-ups, to help Orla repay her larger outstanding debts.

We thought Orla’s pattern of borrowing suggested she’d become reliant on payday loans – rather than using them as a temporary financial stopgap. And in our view, the lender had had enough information to see that she was experiencing longer-term financial difficulties, and wasn’t ever able to get out of debt.

Even looking at the information the lender had about Orla's financial circumstances, it seemed that the repayment for her current loan was taking more than a third of her monthly income. We also saw she had credit card debt of more than £10,000.

We carefully reviewed Orla’s history with the payday lender. And we thought that after she’d applied for her eighth loan – by which point she’d been using payday loans for more than eight months – the lender should have known she was having trouble repaying her debts.

So we told the lender refund the interest and charges paid on all of Orla’s loans after the first eight – and to ensure anything relating to the later loans was removed from her credit file.

“I started with one payday loan five years ago, and now it’s cost me everything”

Ed told us he’d fallen into a pattern of borrowing that had caused him serious problems. He said he’d been borrowing from various payday lenders for a number of years – and now his monthly repayments were often more than he was earning.

Ed said that he’d complained to the lender about the 50 loans he’d taken out with them – but they’d said all the loans had all been offered responsibly. Ed didn’t think the lender had done enough to consider his circumstances before offering him money. So he asked us to look at his complaint.

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Ed told us the loans he had taken out, and the trouble they’d caused, had had a major impact on his life. He said they’d exacerbated his mental health problems and been a factor in his being made bankrupt. He said he’d then lost his home and his access to his child, and he’d recently been made redundant.

Before starting to investigate Ed’s complaint, we could see he was in significant financial difficulties. He was in arrears with his rent and council tax payments and was facing potential prosecution and eviction. So we asked Ed if we could share the details of his current financial circumstances with the lender, who agreed to work with us to move things forward as quickly as possible.

The lender told us that if they had known about the problems Ed had been dealing with, they wouldn’t have continued to lend money to him. However, having looked at the history of Ed’s loans, we thought the lender could have done more to check on his ability to manage as his debt continued to escalate.

For example, Ed had often been taking out loans in quick succession. This suggested he’d been borrowing more to top up his existing loans, which had caused him to fall into a cycle of debt.

We thought that, after a while, the lender should have started to recognise this trend and check whether Ed’s borrowing was sustainable. If they’d asked more questions, we thought they would have realised that Ed was in a very vulnerable position and needed help.

Looking at Ed’s history with the lender, we thought that the lender could have identified Ed’s pattern of borrowing as problematic after he’d taken out his tenth loan. The lender agreed and offered to refund the fees and charges from all of Ed’s subsequent loans, after the first ten.

The lender pointed out that Ed hadn’t made any payments to his current loan. Although they’d agreed to waive the fees and charges, there was still an outstanding debt. And they wanted to deduct balance of Ed’s current loan from the money they were refunding to him.

We’d normally agree that it’s fair for borrowers to pay back the amount the borrowed. But in Ed’s case we pointed out to the lender that Ed had other debts that would have very serious repercussions if they were left unpaid. So, in these circumstances, we didn’t think it was right for the lender to treat Ed’s refund in this way.

Ed was happy with the outcome – and we put him in touch with both debt and mental health charities to help him improve his situation.

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