06Aug

Once again, a major payday lender has failed with many of its customers potentially having a valid irresponsible lending compensation claim against the firm. As with the high-profile failure of another major lender, the affected customers have no recourse to the Financial Services Compensation Scheme and have little alternative but to register as unsecured creditors of the firm, and here they can expect to receive only a small percentage of the compensation they deserve. It is also expected that creditors will have to wait until the second half of 2020 to receive any funds.

With the Financial Conduct Authority scrutinising the payday loan market so closely it is expected that a large number of customers would have cause for complaint against the failed lender.

The firm, which used numerous different trading names, is proposing a scheme of arrangement with its creditors and it will be necessary to place the company into liquidation if the scheme isn’t approved – in a liquidation scenario creditors might be expected to receive less than 1p per £1. Either way, the firm ceased accepting new business in August 2018 and will definitely not be re-joining the market. Because of this, the firm says it is not in a position to make any new offers of redress.

The scheme of arrangement needs to be approved by the firm’s creditors, in a vote in September, and then by the High Court. While acknowledging that “it is unlikely that you will receive the full sum you are entitled to”, the firm says that the complainants “will receive significantly more than if the scheme doesn’t go ahead and [name of firm] has to go into liquidation.”

The Financial Ombudsman Service has been contacting borrowers who have ongoing complaints against the firm to explain that it cannot progress their complaint further at this stage.

The firm’s Chief Risk Officer said:

“Our proposed scheme will deliver the best possible outcome for consumers, and our other creditors. Our goal is to close down [name of firm] in the best way possible while acknowledging that there is no good way to do this. With that in mind, I urge our customers and creditors to back the proposal. Unfortunately, should we fail to gain permission to pursue this solution, the company will proceed to liquidation, minimising compensation.”

In a message to staff about likely redundancies, the firm’s management said:

“This is a result of the unprecedented number of customer complaints received by the business from claims management companies which relate to previous behaviours and conduct of the business towards its customers, pre FCA.”

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