Payday Loan Debt Help & Advice
Need help with your payday loan debt?
If you’re struggling with money, payday loans can seem like a quick fix until your next pay day rolls around. However these types of loans are difficult to stay on top of and any failure to pay on time can send your finances into a crippling downward spiral.
If you can’t pay back your payday loan, our Creditfix advisors can offer expert advice on alternative debt management solutions such as IVA, rather than trying to borrow your way out of debt and worsening your financial situation.
Payday loans – the facts
Payday loans are unsecured, short term loans targeted at people who don’t have enough money to cover their outgoings each month. This can be due to:
- an unplanned expense i.e. a boiler breaking down
- having a low income
- a change to your financial circumstances
You can usually borrow as little as £50 to over £1,000, but no matter how much you have borrowed, the full sum needs to be paid back by your next payday, which if you are struggling month to month as it is this is difficult to manage. On top of this, the interest rates on these loans are high meaning this short term lending solution can quickly turn into mountains of debt which is difficult to manage.
When you take out a payday loan, you provide your bank card details to the lenders. The loan works by ‘continuous payment authority’ (CPA), meaning on the payment due date lenders can take the loan repayment automatically, they can also change the amount without giving you much notice.
To avoid extra charges from your bank it is important to have the full amount you owe in your account on the date payment is due to come out. If payment is declined, some lenders may try to take the money again, however they are only allowed to try this twice.
We strong discourage the use of payday loans, you should only contemplate using one if:
- You will be able to pay back the full amount + interest on your next pay day
- Only need it to cover a one off expense
- You are only needing to borrow a small amount of money
If you are at the end of your repayment period, some lenders may offer to “rollover” the balance for another month – however beware these incur additional costs and charges. Again this cannot be done more than twice.
What if I have multiple payday loans?
As payday loans can be hard to manage due to the high interest rates, you may end up taking out another one to pay off the first one. This can spiral into a vicious cycle which may seem impossible to break free of.
There is the option to consolidate your payday loans into one large loan. This may bring short term relief however, there will be a significant amount of interest added to this and you may still struggle to make these monthly repayments.
Are you entitled to a payday loan refund?
The FCA rules sates lenders should carry out assessments to check the customers’ ability to repay the loan. This should be based on a credit check and what the customer tells them. Customers must also pay back more in fees and interest than the amount they have borrowed.
You may be eligible for a refund if:
The loan ‘rolled’ from month to month
If your lender extended the time you had to pay your loan off they will have added significant charges to do so.
If this has happened, the lender you borrowed from should perform an ‘affordability check’ each month – i.e. an assessment of your incomings and outgoings to check if you can afford the continued credit agreement they’re tying you into.
Often, lenders do not perform these checks, so people who cannot afford the loan continue to accrue charges – often ending up owing more than was ever intended.
You had more than one payday loan at the same time
Again, similar to rolling loans month to month, potential lenders are expected to look at all your outgoings when they assess you for a further payday loan, including other payday loans – and loans that are being rolled from previous months. They should also never lend you more than you earn.
Without this full assessment, a lender cannot decide whether you have the means to repay the loan.
If you’ve struggled with payday loan repayments and the answer to either of these questions is yes, there’s a strong possibility that you’d be entitled to a full or part refund from the lender, at least for the charges that you paid.
How to complain
Firstly, you should complain directly to the company involved. You can get free template letters from citizen’s advice. Complaints can be made within six years of getting your loan and you can complain regardless if you still have your loan to pay off or it has been repaid already. However if you still have your loan to repay, any money refunded will be used to reduce the outstanding balance.
We have put together a step-by-step guide to your complaint procedure:
Step 1 – Gather your information
Firstly, collect any information that is relevant to your loan. This includes any bank statements from the time of your loan as well as the loan agreements you signed.
If you don’t have this information, you should request them from the payday lenders and your bank. Keep copies of your request letters in case you need to follow them up.
Step 2 – Look at where problems occurred
Consider what makes you think you’re due a refund:
- Was your loan rolled without proper affordability checks?
- Did you understand the loan you were taking out?
- Did you have to take out another loan to cover repayments?
Where possible, look at being able to provide evidence of what has gone wrong. If there have been times you’ve struggled, missed other payments and had payments rolled, mark down all the relevant dates and make notes about what happened.
Step 3 – Write letters to the companies involved
Rather than speak to companies on the phone, it’s worth detailing your complaint in a letter, that way you can make sure you’ve covered everything – and have something to reference back to every step of the way.
Your payday loan refund letter should detail the following:
- The fact that you want to make a complaint and details of the loan agreement(s) that it relates to.
- A simple timeline of events – for example, when you took out the loan, the problems that occurred, the support that you did or didn’t receive – etc.
- Details around any other hardship that you felt as a result of the loan or treatment by the company – for example, details of other bills missed, health issues, family problems – and so forth.
- How you would like them to resolve the issue – for example, paying back additional interest, refunding excessive charges, etc.
- Your intention to speak with the Financial Ombudsman Service if they do not resolve your issue satisfactorily within 8 weeks.
If you’re not totally confident that your letter covers everything you’ve experienced, or you’d just like to run it past someone who understands the payday loan complaints procedure, consider contacting your local Citizen’s Advice service. You can talk to someone on the phone, by email – or even arrange an appointment to see someone in person.
If your complaint has not been handled appropriately by the company you’re pursuing, you’re entitled to have the Financial Ombudsman Service act on your behalf. Remember to keep copies of everything you’ve sent and details of telephone calls if you’ve made or received them.
If you’re struggling with payday loan debt, call us now for immediate and confidential free debt help & advice or complete the form.
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