Friday, June 21, 2024

Lenders Working Hard to Cap Their Refunds and Compensation

Doorstep lender, Provident, are the latest large firm to try to cap their compensation for mis-sold loans. Trading since 1880, the company has amounted to over 375,000 doorstep customers but has recently been attacked by the city regulator to refund lenders who are working hard to cap their refunds and compensation due to affordability.

Doorstep lending is not new. Agents will come to your house, or doorstep, to give you money and collect repayment. It is legal, regulated, and approved by the FCA, but Provident are the latest of UK lenders to come under fire for affordability checks and this opens up the floor to previous customers to claim back on any loans they believe to be mis-sold.

Customers should undergo a number of checks when requesting a loan, including employment, credit checks, and affordability measures. However, these are often overlooked, especially with repeat borrowers, who sometimes find themselves in a vicious cycle of debt, if they are already indebted, unemployed, or on benefits.

Other lending giants including Wonga and The Money Shop have been dealt a blow by loan refunds, which can include the entire loan amount, interest, and up to 8% compensation on top. Wonga reportedly paid back £500 million in fees back to customers, settling on many and offering 4p to each £1 owed, with a total compensation estimated to be worth more than £4 billion.

Bournemouth-based Amigo Loans have also been battling with compensation claims for the last year, with over £100 million put aside, although the most recent figure is around £15 million, likely to increase to £25 million.

Both Provident and Amigo Loans are currently in talks with the regulator on whether they can pay a percentage of refunds – with Provident requesting around 10% of the refund value per customer, saying that it will be crucial to avoid administration. Meanwhile, Amigo has proposed a settlement scheme to help refund customers, which may include topping up the refund by using additional profits they make in the next year.

Both firms have also proposed deadlines to the regulator for final dates that refunds can be made by customers – helping to soften the financial blow.

Sara Williams, who writes the Debt Camel blog, said: “The [regulator], the FCA is at fault here for allowing Provident to give all these unaffordable loans and for not insisting that it held enough capital to repay complaints in full.”

“Is this how a responsible lender should behave? It could use the profits from Vanquis to pay the Provident refunds, but it is choosing to put the interests of its shareholders above the interests of its customers,” Ms. Williams said.

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