Many people in financial difficulty have taken out payday loans, and many of these have ended up in a payday loan spiral owing to sky-high interest rates. This means that they are trapped into taking out more and more loans to get by each month, ending up in debt crisis and left with the choice of either not paying back the loans or not paying essential bills. In the end, the individual often ends up with defaults, missed payment markers, and a ruined credit rating.
However, all is not lost. It may be possible to claim back some or all of the interest you have paid. This depends on if the loans can be classed as “unaffordable”.
A loan is “unaffordable” if you had to keep on borrowing in order to live. Just because you paid off a loan doesn’t mean it was affordable – if you had to borrow again, from the same lender or another one, the loan clearly wasn’t affordable.
The regulator says:
“the borrower should be able to make the required repayments without undue difficulty, whilst continuing to meet other debt repayment obligations and reasonable regular outgoings.”
If you only borrowed one or two small loans from a particular lender, they probably cannot have been expected to realise you had a problem. However, if you borrowed from a lender repeatedly, especially if the loans began to increase in size, they should have realised you were in difficulty.
What should I do if I think I’m entitled to a refund?
First, contact the lender with your concerns. The excellent website DebtCamel has detailed information about lender contact details, as well as other useful info about reclaiming.
If the lender is unhelpful, you can send the complaint to the Financial Ombudsman.
It’s also worth checking out the MoneySavingExpert forums to read real-life stories about people who have successfully complained and reclaimed interest.