A DAD-of-two has been refunded more than £3,750 by a payday lender for a loan he could not afford.
John Talbot, 38, from Peckham in London, managed to get all his money back - including all interest and late fees - from two Wonga loans worth £600 which he took out six years ago.
He's one of millions of Brits who are owed compensation from a payday lender who were given loans they could not afford to pay back.
In 2015, the city watchdog The Financial Conduct Authority introduced a price cap for payday lenders to stop customers paying back more than double the amount they originally borrowed.
It also ordered firms to introduce stricter affordability checks on customers before lending them cash.
Last month, the FCA warned firms that they must follow these rules and pay back cash if they didn't.
John was living pay cheque to pay cheque every month when he turned to Wonga after his car broke down back in December 2012.
The admin assistant needed his car to get to work at an accountancy firm but when his credit card wouldn't cover the £800 bill to fix it, he took out a loan with Wonga for £400 over three months.
But the loan came with a huge 4214 per cent interest, and after just one month he increased the loan by another £200 to cover the credit card debts pushing up his monthly payments to £645.
"It was hell. I was earning about £1,200 a month and when the second payment was due, I remember that it was almost impossible to pay without ignoring some of the household bills," John told The Sun. "Every month I was about £200 short.
"In the following couple of years, I made the payments where I could, but despite my attempts the amount I owed actually went up due to the extra interest charges and the extra fees.
"I've had a stutter for most of my life, before the trouble with Wonga I had it under control, but for three years my life it was hell and my stutter came back like never before.
"All this stress had a knock on effect, I became very emotionally withdrawn with my girlfriend and kids."
How to claim a refund from payday lenders
YOU can claim compensation from a payday lender if the loan was unaffordable, even if you've finished paying it off.
If you think you are owed compensation, then then you should follow these steps from DebtCamel on how to claim.
1. Check if you were mis-sold the loan
Before a lender gives you a loan, they have to check whether you are able to pay it back.
For a payday loan to be affordable, you had to be able to pay it back the following month as well as pay your other bills and debts.
The loan was unaffordable if:
- you often rolled loans or borrowed again soon after repaying a loan;
- your loans from a lender were increasing in size;
- some repayments were late; or
- the loan was a significant part of your income.
Ask the lender for a copy of your loan details, like when you took it out and how much interest you paid.
Compare it to your bank statements from the time you took it out and work out if you would have been able to pay back the loan after you paid your bills.
2. Make a complaint
There are websites that will help you submit your complaint to the lender but beware that if you're successful they will take a cut of your compensation.
DebtHacker.co.uk is a completely free tool that will help you with the same process.
If you'd prefer to do it yourself then you should write a letter or email citing citing "unaffordable loans" and ask for a full refund of the interest and charges you paid, plus the 8 per cent Ombudsman interest on top.
Also ask for the loan to be removed from your credit record.
You can find letter templates in DebtCamel, MoneySavingExpert and MoneyAdviceService.
3. Go to the Ombudsman
If you haven't heard anything back from them after eight weeks then you should take the issue to the Financial Ombudsman.
You should also contact them if your complaint is rejected, the refund is too low or they refuse to consider loans that are over six years old and have been sold to a debt collector.
After a friend mentioned that he might be able to put a claim he started to look into ways of getting the debts written off.
John requested the original loan agreement from Wonga - which went into adminstration in August this year - including a list of everything he borrowed with all interest and fees.
He then compared them to his bank statements at the time he took the loan out which showed that the repayments would leave him £200 a month short for the bills.
John then wrote a letter of complaint to Wonga, claiming irresponsible lending due to the fact that the repayments were unaffordable.
Which lenders can I put a complaint into?
YOU can ask for a refund from any payday lender if the loan was unaffordable. Here are just some of the lenders that are still active:
- Sunny Loans
- Mr Lender
- Piggy Bank
- Money Boat
- Loan Pig
- Kwik Cash
- Cash lady
It's harder to claim a refund from a company that's gone bust - but it doesn't mean you shouldn't try.
- Wonga customers should still make a complaint, even though it's gone into administration, but you're not likely to see the cash. The bad news is that if the complaint is upheld then you'll be added to a queue of creditors who are also owed money.
- The Money Shop has stopped offering payday loans but you can still ask for a refund.
He showed them his income and expenses at the time and pointed out that he would never have been able to make the repayments without giving up paying his bills.
He also asked that they refund the interest, fees and to delete any negative information from his credit records.
After six weeks, the lenders agreed with his complaint and refunded him the full £3,754.50 which included all of the late payment fees too.
Now, John's a homeowner and runs a blog MoneyNerd to help others make a claim and even has a letter template those in debt can use to ask for a refund.
"There was no fight at all," explained John. "I didn't even have to take it to the Financial Ombudsman.
"I'd recommend others doing the same as it can really help turn their finances around and set them up for the future.
"At the time, I was planning on getting a mortgage before all this happened and it's probably set me back five years in my life plan.
"It makes me angry thinking about it to be honest, I could have been a home owner a lot earlier."
Last year it was revealed that workers are turning to payday loans to make ends meet and pay off unexpected bills.
Hundreds of thousands of people are set to save money from a cap on rip-off rent-to-own fees, thanks to The Sun's Stop the Credit Rip-Off campaign.
Earlier this year, the FCA announced plans to crack down on "exceptionally high" rent-to-own products, as well as a raft of changes to overdrafts and stricter rules for doorstep lenders.
Why we want to Stop The Credit Rip-Off
WE never want you to pay more than double the amount you've borrowed - whether it's for a new sofa or a loan to help pay your bills.
That's why The Sun has launched a campaign calling for a cap on the total cost of rent-to-own loans and doorstep lending at double the original price or loan amount.
A similar cap was introduced for payday loans in 2015 and since then the number of people struggling with unmanageable debts to those lenders has more than halved, according to Citizens Advice.
People on the lowest incomes, living in the poorest places, are paying a poverty premium – up to 7 million people have resorted to high-cost credit, according to the Department for Work and Pensions.
People whose wages or benefits don't stretch far enough need to borrow from rent-to-own or doorstep lenders to help pay for things such as an unexpected bill or to furnish their homes.
These come with exorbitant rates of interest – more than 1,500 per cent in some cases of doorstep lending.
It is scandalous that one mum who borrowed cash to help keep a roof over her family's head and ended up paying back over THREE times the original amount.
It's time to stop the credit rip-off.
Here's what we demand:
- Cap on all repayable costs at double the item list prices (including fees, add-ons and interest)
- Ban on incentives for all sales staff
- Ban on discounts for existing customers to tempt them into more credit
- Companies to publish example interest rates and costs on all payment options
- Cap at double the original amount borrowed
- Stricter affordability checks
- Ban on discounts for existing customers to tempt them into more credit