Payday loans - making a complaint

A payday loan is a short term loan intended to tide you over until you get paid. It's an expensive way to help people over temporary financial problems which can lead you into even deeper financial trouble if you can't afford to pay back the loan. Payday loan lenders are supposed to check that you are able to pay back the loan before lending to you, but sometimes they don't follow the rules. If a payday lender doesn't follow the rules, you can make a complaint. This will help make sure your lender follows the rules in future and may lead to a claim for compensation.

Reasons for complaining

Most payday loan lenders follow a Good Practice Customer Charter. They also have to follow rules set down by the Financial Conduct Authority (FCA). This means they should do certain things before lending to you, such as:

• make it clear how much it would cost you to repay the loan in total

• check your finances and personal situation to make sure you’re able to pay back the loan

• tell you payday loans should not be used for long-term borrowing or if you're in financial difficulty

• tell you what to do if you have a complaint.

If lenders don’t follow the Charter or the FCA rules, you can complain to the lender. If you’re having difficulties paying back the money you borrowed, you can ask the lender to freeze the interest on your payments and work out a repayment plan. If you weren’t given the right information or you aren’t happy about the way a lender is dealing with you, you can complain to the Financial Ombudsman Service. You might be able to get compensation.

For a full list of reasons for making a complaint to a payday lender, see Reasons for complaining about your payday loan - checklist

If you’re not sure how much you can afford to repay your payday lender, use a budgeting tool.

How to complain

Step 1 - write to your lender

The first thing to do is contact your lender and try to sort things out with them. You'll need to do this before taking the complaint further.

In your complaint, list all the ways in which you think your lender hasn’t followed the Good Practice Charter or the FCA rules.

Work out what you want your lender to do about your problem and include this in your complaint. If you want to come to a repayment agreement, work out how much you can afford to pay and how often.

The lender must acknowledge your complaint within five days of receiving it. If they decide to investigate the complaint further, they should tell you and keep you regularly updated.

• There's a template letter to help you write your letter of complaint

Step 2

Complain to the Financial Ombudsman Service (FOS)

You must give your lender eight weeks to respond or to sort the problem out. If you're not happy after this, you can complain to the Financial Ombudsman Service. If your complaint is upheld, you may be offered some compensation.

The FOS will look at your complaint and advise you how it could be sorted out. If you don't get the result you want, the FOS will start a formal investigation. The final decision given at the end of this investigation is binding on your lender. However, if you don't agree with it, you can take your lender to court.

There is a time limit for making the complaint. This is six months from when you get a final decision from your lender about how it is going to deal with your complaint. If you haven't had a response from them at all, the deadline is six months from the end of the eight week period.

To make a complaint to the FOS, you can download a complaint form from their website at: www.financial-ombudsman.org.uk

Complain to a trade association

Most payday lenders are members of a trade association such as the British Cheque & Credit Association (BCCA). These associations expect their members to follow the Good Practice Charter and can take action against them if they don't. They may also be able to help you sort the problem out.

If you're not happy with the response you get from your payday loan lender, check which trade association they are a member of and then send them a copy of your original complaint, along with the reasons why you aren't happy with the response.

You can check whether the lender is a member of a trade association by looking on their websites. The trade associations which payday lenders might belong to are:

• the British Cheque & Credit Association (BCCA) at: www.bcca.co.uk

• the Consumer Credit Trade Association (CCTA) at: www.ccta.co.uk

• the Consumer Finance Association (CFA) at: www.cfa-uk.co.uk

• the Finance & Leasing Association (FLA) at: www.lendingcode.org.uk

Step 3 – take your lender to court

If you're not happy with the result of your complaint to the Financial Ombudsman, you could consider taking the lender to court. However, you should only think about doing this as a very last resort and you should get advice first.

Next steps

• Complain to your lender

• Complain to the Financial Ombudsman Service at: www.financial-ombudsman.org.uk

• Find out more about taking someone to court

• Find out how much you can afford to repay your lender

• If you need more help

Other useful information

The Financial Ombudsman's website has useful information on how to make a complaint at: www.financial-ombudsman.org.uk