Administrators KPMG have confirmed what was almost certain to have been the case anyway – that customers with valid complaints against two failed payday lenders will not be able to claim anything like 100% of the compensation they deserve.
The parent company of the two lenders entered administration on February 25 2019. Although the administrators appointed by KPMG have successfully concluded a sale of the business and the majority of its assets to another firm, and although this firm has purchased some of the failed company’s outstanding loan book, this does not provide any assistance to anyone with an outstanding complaint against the failed lenders, or to anyone who was considering making a complaint. The purchasing firm did not purchase the failed parent company as a company or legal entity.
There is some positive news for those with outstanding loans with the failed firm, as their accounts have been frozen, and no further interest and charges will accrue.
As payday lenders, and all other consumer credit firms, are not covered by the Financial Services Compensation Scheme (FSCS), the only option for anyone with a complaint against the lender is to contact KPMG and ask to be registered as an unsecured creditor of the firm.
Unfortunately, KPMG has confirmed that the hundreds of thousands of individual customers who might have been due compensation will not receive the same amount as they would have done had their complaint been upheld either by the firm when it was still solvent, or by the Financial Ombudsman Service (FOS). Additionally, there is at present no timescale on when these reduced compensation payments might be made.
KPMG’s statement says:
“The Joint Administrators will contact creditors in advance of announcing an unsecured distribution, when further details are known. Unfortunately, as the Companies have entered administration and have significant redress and other creditor liabilities, unsecured creditors with valid claims will only receive a partial payment of their claims.”
Meanwhile, consumers considering complaining about their payday loan with any other lender are being advised to make their claims soon, as more than one lender has failed in recent months, and more may follow, given the risks that exist in their loan books.
Some politicians have voiced their concerns over the fact that customers of payday lenders do not have any recourse to the FOS or FSCS, but any changes to the compensation system may take some years to come to fruition.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article