How to claim compensation for mis-sold unaffordable credit on cards, loans and overdrafts
MILLIONS of people who were wrongly sold unaffordable credit on cards, loans and overdrafts could be compensated.
Even those who have already repaid what they owed could claim thousands if they can prove that paying off the debt was difficult in addition to day-to-day life.
Lenders are responsible for verifying whether a borrower can afford to repay a loan before extending credit.
More than half of complaints about unaffordable loans are upheld by the Financial Ombudsman Service, which decides whether a customer owes a refund.
Debt counselor Sara Williams says, “Most people who have trouble with money worry it’s their fault, but lenders shouldn’t put big limits on it.”
This week, Rosie Murray-West explains who can recover — and how to do it.
WHAT CAN I CLAIM?
ANY of the following could be worth checking out, according to Sara, who runs the debt collection website Debt Camel:
- Personal loans intended for short-term credit
- Auto Finance Loans
- Guarantee loans that a relative or friend had to repay in the event of default
- Standard personal loans whose monthly repayment was unsustainable given your financial situation
- Bank overdrafts increased without financial control
- Credit cards with high spending limits
Even if you have repaid the loan or closed the bank account, you can still claim.
HOW MUCH CAN I CLAIM?
YOU won’t get it all back, but the ombudsman usually orders companies to refund you the interest you paid, any additional costs, plus eight percent more interest.
You will always be expected to repay the amount you borrowed.
For example, a customer who borrowed £5,000 and repaid £250 over 36 months would receive £4,320, or £4,000 in fees and charges and 8% interest.
It usually requires that any black marks on your credit report due to debt be removed as well.
WILL I SURELY RECEIVE COMPENSATION?
THERE IS NO WARRANTY. However, the financial ombudsman withholds more than half of loan complaints after lenders refuse to repay, so the odds are in your favour.
The mediator will issue a legally binding decision for the company. But it can take more than three months, so be prepared to wait.
If you still don’t agree after the ombudsman makes a decision, your only option is to sue the lender.
You should bear in mind that you will have to pay legal fees – and these could cost thousands of pounds. Again, there is no guarantee that you will win.
WHAT HAPPENS NEXT?
If the lender does not resolve your problem within eight weeks or if you are not satisfied with their response, you can report it to the Financial Ombudsman Service.
The countdown starts from the moment you file this complaint, whether you do so by phone, email or post.
You must do so within six months of the company’s response.
You can complain online at financial-ombudsman.org.uk. Or call 0800 023 4567.
Either way, your submission is free.
HOW TO APPLY?
COMPLAIN directly with your lender first. You can do this yourself or use a free dispute resolution service such as Resolver (resolver.co.uk).
You should avoid companies that charge a fee to claim on your behalf, as this will reduce any compensation and not speed up the process.
Debt Camel has free letter templates on its website if you choose to go it alone, as well as tips on how to customize them.
If your lender is bankrupt, the rules are somewhat different and in some cases you may not be able to claim at all.
Researching the company name on the Resolver website should show you what to do in your specific situation.
The lender can pay you back immediately. If not, it’s worth fighting for.
When you complain, include evidence that you shouldn’t have received the credit because the lender should have been able to see that you couldn’t afford it.
Evidence may include bank statements from when you took out the credit showing that you already had several loans or that you were a regular player.
You can also use your credit report from that time as proof.
YOUR CHANCES OF SUCCESS
% of complaints confirmed by the ombudsman
Guarantee loans: 68%
House credit: 66%
(Also known as home equity loan)
Logbook Loans: 62%
(Credit secured against your vehicle)
Personal loans: 45%
Payday Loans: 46%
Credit card: 37%
£442 Free groceries
THOUSANDS of cash-strapped families are missing out on supermarket vouchers worth up to £442 a year.
The Healthy Start program provides low-income parents with extra help to buy milk, vegetables, fruits, legumes and vitamins.
You must be at least ten weeks pregnant or have a child under the age of four and receive an eligible benefit to get support.
New applicants receive a prepaid card which is topped up with digital vouchers every four weeks. Parents can get between £4.25 and £8.50 per week, or up to £442 per year.
Data from the NationalWorld website suggests that 115,000 people do not get free support.
But with millions of people struggling with a crippling cost of living crisis, it is essential to seek all the help you can get. For more information visit healthystart.nhs.uk.
AT 18 YEARS OLD ? GET A CHILD FUND
NEARLY 200,000 people have a savings pot worth around £2,000 that they don’t even know about.
The latest data reveals that £374m remains untouched in lost Children’s Trust Funds (CTFs).
CTFs were automatically opened by the then Labor government for children born between 1 September 2002 and 2 January 2011. They were later replaced by Junior ISAs.
Children with a CTF received a £250 voucher at birth. Low-income families could get £500.
Children born between 2002 and 2011 also received an additional £250 when they turned seven. Parents could decide whether the money would be invested in stocks and shares or saved in cash.
Savings were not accessible until the child reached the age of 18. But many young adults who have come of age don’t even know they have an account – and could lose thousands of pounds.
You can find a lost CTF using the government’s online search service at gov.uk. Parents can also contact HMRC to find an account for their child.