A Guide to the Evolution of Payday Loans – Are they Fit to Survive? – Chapter 6

Unhappy about a payday loan and unsure about how to make a complaint or claim? Quick Loans Express explains your rights and why there is a rise in payday loan claims in the past few years.

Payday Loan Claims

According to their market research, the OFT found that the majority of payday loan borrowers were happy with the treatment they’d received from their lender. However, one of the signs of a good business – whatever product or service they provide – is the way they react and deal with customers who feel they have grounds to complain.

This chapter concentrates on the issue of handling payday loan claims and complaints. We’ll look at the OFT report. We’ll also explore the changes that have occurred in the past years from 2013 until 2019. If payday loan companies are so competent, why are so many borrowers turning to the FOS to deal with their payday loan claims and complaints?

Procedures for Dealing with Complaints in 2013

Let’s start by looking at what the OFT discovered when they investigated payday loan providers for their March 2013 report. During their inspections, the OFT found that there was:

  • A lack of clear complaints handling procedures, or
  • a failure to apply these policies consistently.

Of the 50 firms which they visited, 38 failed to comply with at least one of the complaints handling rules as set by the FOS (Financial Ombudsman Service).

Lenders’ Lack of Knowledge

It was common for companies and their staff to be unaware of what the rules were. Teams dealing with complaints were inadequately resourced. Also, the staff weren’t skilled enough to deal with complex queries about problems with instant payday loans.

The main result of this lack of awareness and training was that lenders weren’t providing a fair or prompt response to borrowers’ complaints. Equally worryingly, this ignorance also surfaced in the payday companies’ reaction to investigations by the FOS. Some lenders were difficult for the adjudicators of the FOS to deal with. In most of the cases, the lenders were just slow to respond. Furthermore, the lender and/or the staff often didn’t seem to fully understand the role nor the approach of the FOS.

How far does this picture reflect the payday loan industry of 2019?

How to complain to Quick Loans Express

If you feel that we have given you a loan unfairly, we have an easy complaint procedure. You can read all about it in our complaints procedure. If you have any questions concerning your Quick Loans Express small loan, you can contact us by email or phone.

Internal Complaints Procedures for Payday Lenders in 2019

The very fact that companies left in the market have had to go through an FCA authorisation procedure has meant that lenders still in the market have become overall more professional and responsible. This professionalism extends to the training of staff and better awareness of existing regulations. In particular, lenders are far more likely to have a satisfactory internal payday loan complaints procedure in place.

Borrowers are now better informed before they take out a quick online loan. It’s clear how to complain if they’re unhappy about the treatment they’ve received. Moreover, the majority of firms respond fairly and promptly to their concerns.

On the other hand, the ‘Debt Camel‘ website has pointed out some problems when making a complaint to some payday loan companies. These include:

  • A reluctance to send borrowers a copy of their Statement of Account (or charging extra for it)
  • Making unauthorised credit searches
  • Acknowledging receipt of the complaint on the last day of the 8-week period and saying they hadn’t completed their internal investigation yet
  • Ignoring the complaint or rejecting it out-of-hand without a reasonable explanation

Making a Complaint to the Financial Ombudsman Service (FOS)

Even when complainants have been forced to turn to the FOS (Financial Ombudsman Service) for an impartial judgement, the same companies have also ignored the adjudicator’s request for documentation. Making a complaint to the FOS should be the last resort for dissatisfied customers. You should only submit a complaint to the FOS after you give the company eight weeks to reply to their query and/or to address their problem.

If complaints procedures have improved so much since the OFT report, why then are the FOS seeing more payday loan claims than ever before?

What are Borrowers Complaining About?

People are complaining that they can’t afford to make the repayments despite FCA regulations.
In the industry, we call this continuous payment authority. It means that lenders can access funds in a customer’s account automatically. You can, however, cancel continuous payment authorities. And lenders should not try to obtain funds in customer accounts if the client cannot afford the payments or if there is insufficient money in the account. Also, lenders should contact borrowers at least three working days before attempting to withdraw money from the account stating the amount owed.
Customers with previously good credit scores take out a personal loan, get into financial difficulty, fail to repay the loan in full, and then get marked down as a result. Because of the high costs of borrowing in the industry, many customers have perceived the subsequent harm to their credit rating as unfair and have sought help from the FOS. Failing to repay a personal loan can have a knock-on effect on an individual’s ability to access other forms of credit, such as mortgages. Evidence from the FOS suggests that these complaints are not invalid. More than 59 percent of people who approach the authority have their grievances upheld. Thus, the industry is not just experiencing a rise in the number of complaints, but an increase in their quality too.

The Volume of Payday Loan Refunds and Complaints to the FOS about Payday Loan Providers

According to the FOS in their 2016 annual report, there has been a 227% increase in the number of complaints requesting payday loan refunds that customers made about payday loan providers. Of these complaints, 59% were upheld with successful payday loan refunds. In comparison, there is a 43% rate across all other sectors of the finance industry.

The fact that approximately 2 out of 5 complaints weren’t upheld indicates that counting the number of complaints is of limited help when judging the state of the payday loan industry in 2019. To get to the root of the matter, we must examine why complaints are increasing.

Most complained about Banking and Credit Service from Jan 2018 – July 2018

QuickQuid, Pounds to Pocket
4,561 complaints – an increase of 25%. 70% were successful
4,513 complaints – an increase of 92%. 72% were successful
839 complaints – an increase of 101%. 65% were successful
Lending Stream
1,475 complaints – 54% were successful
Payday Express and The Money Shop
486 complaints – an increase of 42%. 61% were successful

*Source: FOS

Reasons for the Rise in Complaints

Better Public Awareness

One of the key reasons why customers turn to the FOS with their concerns is that the media attention focused on the online short term loan industry over the past five years. This has made people more aware of their rights. It has also given them grounds to complain about how their lender treated them. The glare of publicity surrounding the intervention of the FCA in punishing well-known firms has triggered fresh payday loan claims.

One example is the FCA ruling against Wonga in October 2014 which led to £220 million of debts by 330,000 borrowers being wiped out. Wonga also had to freeze interest rates for another 45,000 customers because of irresponsible lending and aggressive debt collection tactics. More recently, in September 2016, the FCA ordered CFO Lending to write off £31.9 million in loans and give £2.9 million in refunds. This was as a result of lenders holding no conversations with borrowers about affordability before signing them up to CPAs sending threatening letters. These lenders also refused reasonable repayment plans from both borrowers and debt advisory services.

In fact, the recent shut down of Wonga was as a direct result of payday loan complaints. Overwhelmed with customer’s complaint and payday loan claims and Wonga shut down in August 2018.

Are All Payday Loan Complaints Justified?

Without wishing to excuse the bad behaviour of some companies in the past, there might be a question of some people jumping on the band-wagon. There’s a naïve assumption that anyone who didn’t have an affordability check is entitled to a pay-out. In fact, the criteria that the FOS use are: ‘If there had been an affordability check, would the lender have given the loan?’ This difference in approach perhaps explains why 2 out of 5 complaints aren’t upheld.

Consideration of Historic Debts

Another reason for the increase in complaints about payday loan providers has been the willingness of the FOS to consider the past misconduct of some firms. Typically, there are time restraints when asking the FOS to investigate a complaint a customer might have had with a financial product. In general, this is six months since the business sent a final answer to them about their claim. Or, it is six years from the event the customer is complaining about. It can also be within three years if the customer should reasonably have realised there were grounds for complaint.

However, in exceptional circumstances, the FOS is willing to look at complaints that fall outside these time restraints. It seems as if in the case of complaints about payday loan providers, they’re willing to consider them exceptional circumstances. This is probably because short-term loans were a relatively new financial product. As a result, borrowers had less awareness of their rights.

Involvement of Claims Management Companies and Payday Loan Refund Companies

Many of the complaints to the FOS were from individuals with the help of debt advisory services or charities. A website like www.debtcamel.co.uk, run by a volunteer at Citizens Advice, provides a free service. It has detailed information about how to complain to key payday lenders such as Wonga, Quick Quid and Instant Cash Ltd (the parent company for well-known lenders: Payday UK, Payday Express and the Money Shop). This website has no doubt helped borrowers who would otherwise be hesitant to complain or not know how to go about it.

However, in the last year, many claims management companies or payday loan refund companies decided it was worth their while cashing in and advertised to fight for anyone who has borrowed from a payday lender. They commissioned to fight for historic payday loans from before the FCA regulations came in to force. The claims management companies caused Wonga and other payday lenders to go out of business.

The BCCA’s Response

The BCCA is one of the bodies representing the payday industry. They have a different theory about this increase in the number of payday loan claims and complaints. After the release of the May 2016 FOS Annual Review reporting this increase, they commented:

It is disappointing to read of a rise in the number of complaints about payday loans, but not unexpected as our members have reported the increasing involvement of claims management companies. It is important to note that these tend to be historic complaints dating back several years.
It’s worrying to think that CMC tempt borrowers to make a complaint and even the FOS questions whether they’re of benefit. The irony of this is that after being exploited by unscrupulous payday lenders in the past, these same people would agree to hand over an average of 30-40% of money awarded to them (plus VAT) to claims management companies when the complaint procedure is so easy to do alone.

Payday Loan Complaints

Whatever your business, you’ll have to deal with dissatisfied customers and try to address their concerns and worries. The payday loan industry is no exception. The need for FCA approval has meant that payday lenders are generally more professional and knowledgeable about the complaints procedures and how to manage payday loan claims. This is a change in comparison to the ignorance which existed when OFT wrote their report.

Complaints to the FOS have sky-rocketed in the past couple of years. However, this doesn’t reflect the state of the payday loan industry today; it has its roots in what happened before regulation.

Taylor Rose
Taylor has been an avid writer since her early school days. At 5, she was creating candy floss planets where heroic candy canes stood up to the evil Russel Sprout. Later, she was documenting historic events, and her writing was always appreciated by all who read it. After working as a program developer for many years, she traded her successful career to make a living out of her writing skills. Nowadays, Taylor helps the Quick Loans Express blog bring current and useful information to people looking for helpful financial advice online – hopefully with a fun twist!

The article "Payday Loan Claims: Your Rights" was last modified on

* Warning: Late repayments can cause you serious money problems. For help, go to moneyhelper.org.uk.