Some of the UK’s best-known payday lenders have become insolvent in recent months, and if any more evidence is required of exactly how difficult it is to operate in this sector, three more firms entered administration between November 29 and December 10. Once again, it seems like a regulatory crackdown is the main reason why these firms have failed, with many lenders struggling to cope with the number of upheld complaints and the need to provide redress to disadvantaged customers.

The first firm, based in London, announced via its website that Paul Boyle, David Clements and Tony Murphy of Harrisons Business Recovery and Insolvency (London) Limited had been appointed as joint administrators.

The second firm, based in Bournemouth, and which also offered instalment loans and guarantor loans, is now in the hands of joint administrators Shane Biddlecombe and Gordon Johnston of HJS Recovery UK Limited. Earlier this year, this firm was instructed by the Financial Conduct Authority (FCA) to suspend lending activities after issues were identified with its affordability checks. Lending only resumed at this firm in September 2019, but media reports suggest that the firm’s investors withdrew their backing at this time due to the FCA’s action.

Finally, Chris Laverty, Trevor Patrick O’Sullivan and Helen Dale of Grant Thornton were appointed as Joint Administrators of a lender based in Slough.

At all three firms, new lending activity has ceased, and the administrators will now seek an orderly wind down of the firms and will attempt to recover the firm’s assets for the benefit of its creditors.

Customers with complaints against the firms should still approach their lender in the usual way and the administrators will treat all complaints as a claim being made by an unsecured creditor. There is no protection for payday loan borrowers offered by the Financial Services Compensation Scheme, and many customers of the lenders that failed earlier this year have said their compensation payouts were much smaller than they expected.

Customers with active loans should continue to make repayments in the normal way, as they could still damage their credit score and/or incur late payment charges if they cease paying.

The statements issued by each firm also state that a number of staff are still employed in customer service roles, and that the FCA continues to supervise the firms while they are in administration.

The Consumer Finance Association (CFA), a trade association that represents a number of short-term lenders, has called on the new government to ease the burden on its member firms.

CFA chief executive Jason Wassell said:

“The future of consumer credit continues to be uncertain. We do believe that the government must find solutions to stabilise the regulatory environment. We would be delighted if they could share some of their ‘certainty’ with us so that we can better serve our customers and introduce innovation.

“This is now the time to think strategically about the consumer credit that people will need over this next decade and how it should be regulated. There has been a big debate about creating a new economy. In that new economy, consumers will need products that suit their everyday credit needs. They deserve a regulated market that consistently delivers, rather than accessing de-regulated alternatives.”

 

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