Loan Issues

When you take out a payday loan, you do so in the expectation of repaying the loan accurately and on time and expecting the lender to treat you fairly and legally, exactly as they state in their terms and conditions. Nevertheless, sometimes a relationship with the lender will break down and either you or the lender will fall out with the other side. Do you know what actions you can take to ensure that the lender treats you properly during this period, and if not, where can you turn to for help?

If not then this section of the website is designed to help you. The content is split into what we feel are the five most important areas;

  • What you should expect from your lender if you have a problem.
  • What to do if your lender is NOT doing what they should if you have a problem.
  • How to STOP money getting taken from your bank account!
  • Is my lender legal and how can I report a non compliant or illegal lender?
  • What independent “official” help is available?

The key facts to remember when reading this page are;

  • You and the lender have agreed to the terms and conditions related to your payday loan. Those terms MUST comply within the law to be binding.
  • Where either party breaks those terms and conditions, the contract between you will explain what happens next and how the matter will be dealt with.
  • Both you and your lender should be clear about anything and everything that involves your loan, but sometimes the person borrowing the money does not realise what the terms and conditions really mean to the lender.

What this all means in a little more detail.

You should read and understand all of the terms and conditions related to your payday loan. Where there is anything that you don’t understand, you should ask the lender to explain in detail or turn to other helpful advice and ask an expert to explain what each term means so that you fully understand your responsibilities. Now we fully understand that in the heat of the moment many people are more interested in getting their hands on the money rather than reading or fully understanding the contract. Before you take out a payday loan we strongly recommend you read our guide to understanding your lenders agreement. It is best to be a prepared consumer!!

 

What you should expect from your lender if you have a problem

OK so assuming that the relationship has broken down between you and the lender, what should you do?

What a lender can and can’t do

Well the first thing that we think is most important is to fully understand what a lender can and can’t do. Below we have outlined the most important issues.

  • A lender must provide you with their terms and conditions before you except their offer to agree to the application you made or a modified version.
  • Where your payday loan has been rolled over twice to help you clear and extend the debt, lenders are NOT allowed to roll over the debt a third time.
  • Before rolling over a loan, the lender must provide the consumer with a full set of information of how and where they can gain access to free debt advice.
  • Payday lenders can only use a CPA to take a payment across two failed attempts, limiting the number of times they can try to take money from your bank account.

There is currently no cap on fees and charges that the lender may apply to your account, but these are under consideration by the Financial Conduct Authority and a cap may be in place by early 2015. The payday lender must inform you in advance with a list of all their potential fees and charges.

A lender cannot:

  • Harass you to chase the debt
  • Harass your employer
  • Harrass your family
  • Move the debt on to debt collectors before giving you the opportunity to make a new repayment plan
  • Remove goods from your home in lieu of the debt (without a court judgement)

It’s also worth mentioning that payday lenders are allowed to look at your credit report before offering you a loan or refusing your application. Most will not do a full credit lookup due to the cost. The majority will use Experian[1]  or Equifax.[2] 

Recently the FCA has introduced new rules that impact the payday loans sector, you can read our summary as to how these regulations will impact you as a borrower here.

Lender best practices

The majority (around 90%) of payday lenders are signed up to and are supposed to agree and operate within the Good Practice Customer Charter[3]  

This lists these essential payday lender commitments:

  • Provide clear information and examples of payday loans, fees and charges
  • Not pressurise customers to take out another (roll-over) payday loan to clear a previous loan
  • Carefully check that a customer can repay their debt – can they afford the loan?
  • Explain what a CPA (Continuous Payment Authority) is; how it works and how it can be cancelled
  • Give 3 day’s notice of taking a CPA payment
  • Freeze all interest, fees and charges where 60 days have elapsed and the debt cannot be cleared

What a lender should do if you are having issues

What the lender should do if you are having issues with them is to listen fairly to all that you have to say and make a reasonable response within a short timescale. It is in the lender’s best interest to deal with your issue and where this is related to the outstanding debt, they will need to prove, at a later stage that they have acted in a manner that allows the restructuring of the debt to match your affordability, particularly if that has changed since your original application.

By law, a payday lender must treat you fairly and give you a reasonable amount of time to repay the loan.

They must suspend recovery of the debt for a period of time that is reasonable to both parties, and especially so if you are organising a repayment plan with your choice of debt adviser.

All payday lenders must direct you to sources of free and independent debt advice, whether you ask for help or not. We have compiled what we feel to be all the most helpful recourses for debt advice all in one place to try to make getting help if needed as fast as possible.

Payday lenders should accept small token payments on a temporary basis when you don’t have enough money left for essentials for you and your family, like paying for food, your rent or mortgage and your utility bills.

They are not allowed to bombard you with calls on the telephone, by email, or with persistent text messages.

 

In the first instant, you should inform your lender in writing, what it is that they are not doing properly. The same applies if they have not treated you fairly or you are no longer happy with a repayment plan that they have proposed.

You can use a sample template letter to complain about a payday lender using this link;

https://www.moneyadviceservice.org.uk/en/articles/problems-paying-back-payday-loans

If you need to have more information on or you feel you would like some FREE help from a debt charity to help communicate with your payday lender then we think the below section of the website will be of particular interest to you.

Where the lender does not resolve the matter within eight weeks in a manner that is agreeable to you, you can complain direct to the Financial Ombudsman Service.[4] 

 

How to STOP money getting taken from your bank account!

If things are starting to slip out of control one of the most important things you can do (despite it perhaps not been the easiest thing to do) is to face the problem and start to get control back. Part of getting control back will consist of following the above steps. The below steps are designed to allow you to gain control of your bank account again and stop the lender from taking money from you. When you are then back in control you can then deal with the outstanding loan within a more controlled manner on your terms. We strongly encourage you to do the below in tandem with one of the FREE debt charities we recommend.

What if I can’t repay on time

Speak to your lender as soon as you know you won’t be able to make a payment on the due date. This is always best as early as possible.

Where you enter into dialogue with the lender at the earliest possible stage, they are more likely to be able to help you to find a new date to take the money or restructure your account to make the payments affordable for you. When they are surprised (without any warning from the consumer) and cannot claim their money, they will almost certainly and instantly apply fees and charges to your account.

Where you cannot make any payment whatsoever to your payday lender, after 60 days, they are obliged by law, to freeze your account and stop adding interest, fees and charges. Nevertheless, they will have to make arrangements to collect the debt from you.

Where you have money in your bank account, but need it for your food and utility bills, for example, you may need to think about cancelling the continuous payment (CPA) authority that is linked to your bank account and from where the payday lender will take their money on the due date.

By cancelling the CPA when you don’t have the funds in your bank account, you will save yourself from paying bank account fees because your bank will charge you for bouncing the request for money. Nevertheless, your lender may apply fees and charges, which you should know about in advance, if you fail to make your payment on time.

Your payday lender is allowed to charge you interest, fees and charges if you fail to repay your debt on time.

Rollover of your loan

Where you are unable to repay your debt, your payday lender might suggest that you roll over your loan for another month. This is not necessarily a good idea because you will be paying more interest and charges on the debt that is already outstanding and you will certainly owe more than you originally borrowed.

It is better to reach a new agreement with the lender about how you can set a repayment plan in action, which is more closely linked to your ability to repay the debt properly.

From 1 July, 2014, payday lenders must first offer you the option of turning to free and independent debt advice. Also, they are not allowed by law to roll over your loan more than twice.

How to cancel a CPA (Continuous payment authority)

Payday lenders use CPAs to collect funds from the customer’s bank account as the payment agreement for the debt repayment. Should the consumer not have money in their bank account, they may suffer a fee or charge from their bank for refusing the CPA. Payday lenders are supposed to only try twice to recover the payment, but some try multiple times, adding severe bank charges to the customer’s account and adding fees to the payday loan account because of refused payments.

You can cancel a CPA with your bank by:

  • Writing to your bank to tell them to cancel the CPA
  • Writing to your payday loan lender and telling them that you have cancelled the CPA at your bank. You can tell them any further attempts to take money from your bank account are unauthorised.

Sample letters to send to your bank and payday lender are on this Citizen’s Advice website page http://www.cas.org.uk/about-us/social-policy/payday-loans-your-rights-their-responsibilities and here https://www.nationaldebtline.org/EW/sampleletters/sole-letters/Pages/Withdraw-your-continuous-payment-authority-from-payday-loan-company-%28sole-name%29.aspx

Where you cancel a CPA, retain information about the cancellation, such as the date, time and person you spoke to, so that if the bank makes a mistake and sends the money to the lender, you will be able to complain to your bank and they are required to refund you by law.

 

How can I stop getting pestered with emails and texts?

You can report the payday lender to the Financial Conduct Authority http://www.fca.org.uk/ if they persist in pestering you with emails and text messages, usually to chase you for payment of the debt or to try and encourage you to take out a new payday loan.

You can also report their actions to their trade association, if they are member.

When you receive too many text messages, you should NOT reply with ‘Stop these text messages to my number #### ######.’ They want to confirm that you are receiving the messages and will continue.

Forward spam text messages to your mobile provider.

Where you receive unwanted emails, you can redirect them straight to your spam folder. You may be able to add them to your blocked sender’s list.

For text messages and emails you can complain direct to the Information Commission. http://ico.org.uk/

Where a payday lender keeps contacting you (in effect, chasing you for an outstanding debt,) when you are working with a debt adviser, you can send an email or letter to the lender and ask them to stop contacting you.

The lender is not allowed to call you at work without your permission and they cannot discuss your debt with your employer or family members without asking you first and gaining your written permission.

Payday lenders are not allowed to refuse to deal with a debt advice service that is acting on your behalf.

You can contact the telephone preference service to complain about any business that continues to make marketing or sales calls to your telephone number, after you have told them to halt the practice. [5]

Is my lender legal and how can I report a non compliant or illegal lender?

All lenders and brokers for payday loans are required to apply for and receive a Credit Consumer licence, to be able to legally operate in the marketing and distribution of payday loans.

You can check to see if a business is on the Consumer Credit Register[6]  as all lenders offering payday loans must be registered to carry out credit consumer activities. The lender may have interim permission or be fully approved and registered on the main Financial Services Register.[7] 

Where a lender has neither interim not full authorisation to operate in the payday loans market because they do not have a credit consumer licence, you can report them to the Financial Conduct Authority[8]

You can ask the Advertising Standards Authority to take action against a payday lender who continues to advertise illegally.[9] 

What to do if you find you’re dealing with a loan shark

Loan sharks are illegal lenders and not governed by the payday loans legislation as they cannot be registered at the Financial Conduct Authority as they do not qualify for registration. The authority maintains a list of licensed lenders[10]  and if they are not on the register, they cannot legally loan you money.

There might appear to be some good loan sharks who will be pleased to lend you money, providing you pay the debt back completely and on time. You will see the bad side of loan sharks if you fall behind with your payments as you will be pressurised into borrowing more money to repay the previous debt, time after time.

You are unlikely to receive proper paperwork from a loan shark, and many are notoriously linked to intimidation, threats and violence. Nevertheless, they still have to apply the laws of the land and if they harass you, they are breaking the law. They have no legal right to force you to repay the debt because the loan was illegal in the first place.

You can report a loan shark to the illegal money lending Stop Loan Sharks email address which can be found on the government money and tax website. https://www.gov.uk/report-loan-shark There are separate email addresses and telephone numbers for England, Wales, Scotland and Northern Ireland. In Scotland, you can talk direct with the Scottish Illegal Money Lending Unit. http://www.stoploansharks.org.uk/

Although the loanshark is breaking the law by lending you money, you have not broken the law by borrowing money from an unlicensed money-lender.

What independent “official” help is available?

The Financial Conduct Authority is the regulator of all payday lenders in the UK.

The majority of payday lenders are part of a trade association and can be contacted in relation to a matter that involves a payday lender member.

You can contact free debt advice organisations and charities, as these are set up to help individuals that require advice related to a payday lender.

Dealing with serious debt is not easy, but you must face the facts and deal with your lender sooner rather than later, if your debt problems are to be solved.

These are the stages of dealing with your debt:

  • Acknowledge your debt to yourself and your closest family/friends that need to be involved with helping you
  • Carefully analyse you debt and your spending compared to your income
  • What regular or irregular costs can you cut out? Can you make your sandwiches for less than shop purchased ones?
  • Find ways to repay your debt more efficiently. You may need to seek help with a debt advice guidance helper for this add links to debt advice page
  • Buy things you must have and leave those you want in the shop
  • Become tough and clear your debts through careful budgeting and managing your money better add link to Budgeting and Money Tips
  • Talk to your payday lender
  • Decide the best way forward and not just accept the first solution offered to you as you look to become debt free for the long term, not just for a month or two
  • Seek help from a FREE professional debt advice organisation or charity

When you have trouble repaying your payday loan, you must inform the lender when you’re still dealing with a debt adviser and it is best to inform the lender in writing of your actions. The lender must give you a reasonable amount of time to agree a new repayment plan before they move your debt to debt collectors.

Free debt advice is available from a variety of organisations and charities including;

 

Refrences

[1] experian.co.uk
[2] equifax.co.uk
[3] cas.org.uk/about-us/social-policy/payday-loans-your-rights-their-responsibilities/payday-loans-good-practice
[4] financial-ombudsman.org.uk/default.htm
[5] tpsonline.org.uk
[6] fca-consumer-credit-interim.force.com/CS_RegisterSearchPageNew
[7] fca.org.uk/firms/systems-reporting/register
[8] fca.org.uk/consumers/protect-yourself/report-an-unauthorised-firm/consumer-credit-reporting-form
[9] asa.org.uk
[10] fca.org.uk/firms/systems-reporting/register/search
[11] gov.uk/report-loan-shark

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Taking a Closer Look

The above article should help you go some way to solving an issue you might have with your lender. If you however feel you need a more detailed guide to helping you then we have compiled a number of different ones that each focus on important issues that might occur with your payday loan.

As your payday loan is expected to be cleared by your next pay day, there would appear to be a straight forward agreement in place between the consumer and the lender. Sometimes (and too often with payday loans) things do go wrong and the parties fall out. If you believe the lender has made a mistake and won’t put things right to your satisfaction, you will have the option to complain to the lender and elsewhere.

The lender will have a ‘Good Practice Charter’ in place and they will also follow the rules laid down by the Financial Conduct Authority (FCA). This clarifies that the lender should have checked your application carefully before agreeing to lend the money. They should realistically expect the individual to be able to repay their debt and on time.

Click to read the full article

There are many dreadful disasters, financial and personal, that can strike individuals and families at any time, but heading towards debt or being in a terrible debt situation for a long time, can make or break people and families.

It’s been said many times before, but it is essential that anyone who foresees a debt problem in the near future begins to deal with it as soon as possible. For individuals or families in the middle of a long-term debt problem, they need to seek advice from the right people or they may face staying in debt for a long term into the future. A short term debt that continues to grow can become a nightmare that can last a decade or more.

Click to read the full article

After making your application, you will agree to the terms and conditions imposed by the lender, before you have access to their process of seeing if you are eligible for the loan and certainly before you receive the funds.

Although this is supposed to be in English that you can easily understand, this is not always the case, so we have taken a look at the most regular clauses used in the contract between the lender and the person taking out the payday loan and have explained each part in common English so that you will know what you are letting yourself in for.

Click to read the full article

Data Protection Reg No: Z3508710 - Consumer Credit License Number: 655622