How people power brought down the payday lenders

A massive increase in the number of people demanding compensation for alleged missold loans has forced the closure of yet another payday lending giant.

On Friday morning, QuickQuid’s owners Enova announced the business was closing its UK operation due to “regulatory uncertainty”.

Weighed down by complaints from those who believe they were signed up for loans they never should have been offered, it is the second high-profile collapse since Wonga went into administration in August last year in very similar circumstances.

Payday lenders have long been the target for consumer groups as well as regulators for pilling excruciatingly high interest loans on those least able to pay them back. QuickQuid’s interest rates had been as high as 1,300 per cent.

The financial regulator, the Financial Conduct Authority, introduced tighter rules for payday lenders in 2014 and 2015, including more robust affordability checks on applicants and a cap on the total a business can demand in repayments to twice the original amount borrowed.

But the number of complaints made against QuickQuid has soared in recent years, according to data from the financial ombudsman. Between the second half of 2017 and the second half of 2018, the number of people making formal complaints, including demands for compensation, rose from just over 1,500 to more than 5,700.

With a total of 10,400 complaints made against the firm over 2018, QuickQuid was the most complained-about banking and credit firm in Britain last year.

By comparison, Wonga’s compensation claims – widely accepted as the key reason for its collapse – merely doubled in the year before the administrators were called in.

Some 40,000 complaints were made about the payday industry in 2018-19 and, crucially. the ombudsman typically upholds somewhere between 60 and 70 per cent of them a year.

Financial fight back

Commenting on the QuickQuid reports, Peter Briffett, co-founder and CEO of the income streaming app Wagestream, said: “This is another nail in the coffin of the payday loans industry and a fantastic day for consumers.

“Those under financial pressure are better informed and more financially literate than they’ve ever been and there has never been a wider variety of alternatives to payday loans available.

“On top of that, the amount of free financial education available online has ballooned in the past five years as financial services companies have started to realise the value of offering greater guidance to customers.

“QuickQuid’s demise is symptomatic of this disappearing knowledge gap as well as a dramatic shift away from exploitative interest rates.

“After Wonga’s collapse, and now QuickQuid’s woes, this finally looks like the twilight of this greedy industry.”

Twist of fate

There’s only one snag. If QuickQuid had somehow survived, there was decent precedent for refunds and or compensation. Back in 2015, CashEuroNet UK LLC, trading as QuickQuid and Pounds to Pocket, agreed to redress almost 4,000 customers to the tune of £1.7m after the regulator raised concerns about the firm’s lending criteria.

More than 2,500 customers had their existing loan balance written off and more almost 460 also received a cash refund. (The regulator had said at the time that the firm had also made changes to its lending criteria.)

But experts are warning those pursuing complaints against QuickQuid may now never see the compensation they believe is owed to them.

After Wonga’s collapse, administrator Grant Thornton revealed that 40,000 alleged victims of misselling were unable to compensation.

“If you’re currently claiming compensation from QuickQuid for a missold loan you will need to wait until the administrators have wound up the company,” says Tola Fisher, personal finance specialist at money.co.uk. “Unfortunately, you might find yourself at the back of a long queue to get hold of your money.”

Consumers who are paying back a loan can’t relax either. Their accounts will most likely be bought by another business and the repayments will still have to be made. Sadly, you can’t just stop paying.

“Make sure you stick to your repayment plan and pay up on time, otherwise you could face extra fees and charges,” adds Fisher.

“It’s also important to remember that if you miss repayments this could harm your credit rating as future lenders look at how you’ve managed your existing credit when making a decision to lend or not.”

The Money Advice Service provides information on alternatives to high-cost payday loans.