MSE News: Payday lender The Money Shop lent thousands too much money

JimmyTheWig

Alexis95 wrote: »

Are you sure about that?

I think they can be reasonably sure when the article says "The Money Shop will refund more than £700,000 in interest and default charges, which customers may have incurred through late payment of their loans."

The article says 6247 are affected.
The article says the lender is expected to refund £79k in cash
The article says the over-borrowing by those affected was on average £12

£79k divided by 6247 = £12.64
Coincidence?

Yes, I think it is. The £79k is just the cash refunds. The total amount to be refunded is £700k, as you point out.
£621k of it is being used to reduce people's outstanding balance. I.e. most of the charges that have been levied against these people is still owing to the lender.

JimmyTheWig

Alexis95 wrote: »

Well last Friday, my little brother was absolutely brassic and begged me to lend him £10 so he could go out with his mates that night.

Now I only had a couple of £20 notes in my purse at the time, so I kindly said I would lend him £20, and he could either give me £10 change back Saturday morning and the other £10 on Thursday when he gets paid, or if he blows the lot, I would wait until Thurdsay for the full £20 to be returned.

Guess what? Yep, he blew the lot.

Anyway, now he's read this article and is demanding another £10 off me as I overlent to him on Friday. Otherwise he says he will only pay me back £10 on Thursday.

We asked our mum as she is always reminding us that 'mum knows best', and mum said after also reading the article, that little brother does seem to have a point.

I think this is a brilliant analogy to a point and if it's a true story I think it's great on many levels.
But it doesn't quite fit what is being returned.

It would be more like this...
Brother: Can I borrow £10? I can pay you back £12 on Thursday. If, for some reason, I don't pay you back on Thursday I'll pay you an extra £5.
Alexis: I've only got £20s. I'll lend you £20. So that will be £24 you pay me back on Thursday.
Brother: Thanks, sis. [To mates} Drinks are on me, boys!

On Thursday...
Brother: Hey, sis, you know I owe you that money? Well, here's the £12 we all knew I could afford. I'll give you the rest at the weekend.
Alexis: No problem, bro. As you haven't paid me back in full on Thursday as agreed, I'll add £5 to what you owe me.
Brother: Mum! That's not fair!
Mum: You're right, son, that's not fair. Alexis, you shouldn't have lent him all of that money knowing he could only afford to repay £12 today. You need to "refund" him the £5 charge by taking it off what he owes you - so he just owes you the remaining £12.

Apples2

The £700k is is complete misnomer, it was never real money.

It is made up from random imaginary charges applied to a debt which was never going to be repaid anyway.
It just means they have slightly less which they won't repay.