Think loan provided to me may be classed as unaffordable

ThunderHoof

Hi, I was provided a £3,500 loan last Nov for debt consolidation purposes because I was struggling to meet the minimums and to give me a bit of cash as breathing space.

It was a staggering 93.6% APR, 48 payments of £210.44 a month for a total repayment of £10,101.12. In hindsight this was a stupid loan to take out but my mental health issues among other things impact on my ability to manage finances properly.

Below is what I owed and how much my monthly payments were at that time, Halifax was an overdraft, the rest were credit cards. I'm not sure what my balance on the Fluid and Capital One cards were at the time of the loan so I just put the max credit limit so as to be as generous as possible to the loan company in terms of how much my card payments would reduce.

Halifax £1,450 49.91%, minimum payment, 3.37%? ~£48.90 

Newday £3,141.72 24.684%, contractual minimum payment, interest + 1% of remaining balance ~£111.29

Virgin £5,803.60 20.01%, contractual minimum payment, interest + 1% of remaining balance ~£156.64

Fluid £450? 35%?, contractual minimum payment, interest + 1%? of remaining balance ~£17.63

Capital One £200? 35%?, contractual minimum payment, interest + 1%? of remaining balance ~£7.83

Now assuming that all £3,500 was used to pay off the highest interest debts, that would be Capital One, Fluid, Halifax completely paid off and Newday reduced to £1,741.72 so monthly repayments for that card would then be approx. £53.24.

So I would no longer be paying £7.83 + £17.63 + £48.90 + £58.08 = £132.44 so the loan has actually increased my debt payments overall by approx. £78 per month when I was already struggling to meet the minimums and had no cash, plus it has given me thousands of additional debt due to the much higher interest rates. The loan company even sent a cheque directly to fluid to pay off the card because they were said they were concerned about how affordable the loan would be for me. Does this not raise alarm bells?!

As a result of all this I have had to enter a debt management plan with StepChange paying £300 a month, to the debts listed below, bearing in mind I have already paid £862.28 towards this £3,500 loan I am showing a balance of £9,238.84!

Creditor - EVERYDAY LOANS LTD
Monthly Payment - £115.48
Current Balance - £9,238.84

Creditor - VIRGIN MONEY CREDIT CARDS

Monthly Payment - £95.11

Current Balance - £5,645.30

Creditor - NEWDAY

Monthly Payment - £49.63

Current Balance - £2,993.57

Creditor - HALIFAX PLC - OVERDRAFTS

Monthly Payment - £39.78

Current Balance - £1,412.32

The overdraft defaulted straight away when I entered the DMP and the credit cards are on a 0% breathing space plan at the moment, but Everyday Loans are being inflexible considering the circumstances.

Does it look like I may have a case to argue that the loan given to me was unaffordable because it increased my monthly payments when I was already struggling to meet the minimums and that it was not appropriate for debt consolidation as it substantially increased my overall debt, and that they failed to take into account my diagnosed psychiatric conditions regarding my ability to manage my money appropriately?

Would really appreciate any advice on what further steps to take next, StepChange have been in contact with Everyday Loans and they haven't reduced the interest as far as I can tell, they suggested contacting the loan provider directly to see if I could sort anything out. So should I contact Everyday Loans with a breakdown of costs and try to argue that it was unaffordable and negotiate a significantly reduced rate at the very least?

If push comes to shove can I just stop paying them in the hope that they will default it? I mean what would the worse case scenario be, they pay hundreds to take the case to the County Court, and if the court disagrees with me that the loan was unaffordable I get ordered to pay it back at what I'm already paying them now anyway and get a CCJ which will fall off my credit file at about the same time the defaults from the other 3 lenders do?

Please tell me if I'm missing something obvious here.

sourcrates

Yes you can make a claim for unaffordable lending, but its not about whether it increased or decreased your monthly payments, after all that is what consolidation does normally, its a bit of a double edged sword, as you would have to show you made the lender aware of your mental health issues, as its not something you would usually disclose.

You should not be paying them any amount that is unaffordable to you, even when legal action is taken, the court sets payment according to your disposable income available, not on the merits of the claim, that is not their role.

Debt Camel cover`s the complaints process here -

Refunds Archives · Debt Camel

enthusiasticsaver

Debt consolidation never works and certainly that interest rate is criminal. I would follow sourcrates recommendation to complain and if they haven’t stopped charging interest I see no advantage to paying it back through a DMP. Assuming it is unsecured I would stop payments. You can still include the other debts through the DMP. You want the loan to default ASAP. 

ThunderHoof

sourcrates said:

Yes you can make a claim for unaffordable lending, but its not about whether it increased or decreased your monthly payments, after all that is what consolidation does normally, its a bit of a double edged sword, as you would have to show you made the lender aware of your mental health issues, as its not something you would usually disclose.

You should not be paying them any amount that is unaffordable to you, even when legal action is taken, the court sets payment according to your disposable income available, not on the merits of the claim, that is not their role.

Debt Camel cover`s the complaints process here -

Refunds Archives · Debt Camel

Thanks very much. Does a lender not have a duty to ask about the reason the debt came about i.e. mental health issues?

I have sent them the below letter.

Everyday Loans Ltd
1st Floor, Guildhall House
Guildhall St
Preston
PR1 3NU

8 April 2022

Dear Sir/Madam,

Account No: ****************

I would like to make a complaint against your company. The details are set out below.

On 08/11/2021 I took out a loan of £3,500.00 with you.
I was provided a loan primarily for debt consolidation purposes because I was struggling to meet
the minimum payments towards my existing creditors.
Below is an estimate of what I owed to creditors, their interest rates and roughly how much my
monthly minimum payments were at the time of the loan agreement.

Halifax - £1,450 - 49.91% - minimum payment £48.90
Newday - £3,141.72 - 24.68% - minimum payment £111.29
Virgin - £5,803.60 - 20.01% - minimum payment £156.64
Fluid - ~£450.00 - ~35.00% - minimum payment £17.63
Capital One - ~£200.00 - ~35.00% - minimum payment £7.83
The monthly repayments therefore totalled approx. £341.84.

Now assuming that all £3,500 of the loan was used to pay off the highest interest debts, I would
no longer be paying Halifax, Fluid, and Capital One any repayments and my repayments to
Newday would be reduced making my monthly payments to creditors the following amounts,
£7.83 + £17.63 + £48.90 + £58.08 for a total of £132.44. But reducing my unaffordable card
payments to £209.40 and then adding a loan repayment of £210.44 per month has the net effect
of increasing my monthly debt repayments to £419.84 making them even more unaffordable.

Everyday Lending even initially sent a cheque directly to Fluid to pay off the card citing
affordability concerns, this demonstrates that as a creditor you were not confident this loan was
affordable for me.

Furthermore no consideration was given to my mental health and diagnosed psychiatric
conditions which affect my ability to manage money and which were the primary contributors to
me owing so much debt in the first place.

As a result of this loan I have had to enter a debt management plan with StepChange bearing in
mind I have already paid £862.28 towards this £3,500 loan I am still showing a remaining
balance of £9,238.84.

Everyday lending have not agreed to reduce the total amount of interest payable on the loan
despite my circumstances being explained to them by StepChange, this is in contrast to other
creditors who were much more understanding and froze interest.

Because of the higher interest rate charges compared to the creditors you replaced, this loan has
given me thousands of pounds of additional debt over the proposed 48 month period making me
more indebted.

This has also exacerbated my existing anxiety and depressive disorders.

I would like Everyday Loans to freeze interest so that I can pay the loan back within a sensible
time frame, considering that I have already paid back £862.28 of the £3,500 loan there is still
scope for Everyday Loans to make a significant profit on the loan without having to bankrupt
me.

If you fail to resolve my complaint within 8 weeks, or if matters are not settled to my
satisfaction, I will have no alternative but to refer my complaint to the Financial Ombudsman
Service.

Please do not respond to this letter by telephone. Written communication by either email or
postal letter is acceptable.

I look forward to hearing from you.
Yours faithfully
************

Sncjw

But did you make the lender aware of mental health issues. 

Rob5342

Debt camel has am article.you.mind find useful here:

https://debtcamel.co.uk/debt-mental-health/If they haven't taken your.mental health into consideration after you told them about it then you'd have good grounds to complaint. If you haven't told them about it and there was nothing you did to indicate it then thow are they to know?

ThunderHoof

Well by asking... how the person got into debt is a pretty major factor in determining affordability.

Anyway the mental health thing is not really the main issue here, it's the fact that the payments weren't affordable.

That link says page not found unfortunately.

Sea_Shell

If they'd have asked about your mental health, but then turned you down, what would your alternative strategy have been, at that moment (not with hindsight)?

ThunderHoof

Well I certainly couldn't have taken out a loan because they were the only lender on the market willing to potentially offer me one because of my credit record. So this additional debt would have been avoided!

Have no real assets so would possibly have looked into bankruptcy which would put me in a better financial position than I am now with this loan.

ThunderHoof

enthusiasticsaver said:

Debt consolidation never works and certainly that interest rate is criminal. I would follow sourcrates recommendation to complain and if they haven’t stopped charging interest I see no advantage to paying it back through a DMP. Assuming it is unsecured I would stop payments. You can still include the other debts through the DMP. You want the loan to default ASAP. 

Yes, it's unsecured, I have asked StepChange to stop payments when I get to £3,500 repaid until I come to a sensible agreement with Everyday Loans. I'm perfectly happy paying back what I have borrowed and then some via interest, but this loan was just not in my interest and exploitative at the current interest rate. There needs to be more regulation to stop these lenders offering unaffordable loans and not doing checks on basic factors that affect someone's ability to manage money. A DMP with my existing creditors or even a debt relief order would have been much more appropriate for me than this loan.

ThunderHoof

So I thought I'd post an update from the adjudicator so far seeing as it might benefit other people going through the same thing, or just interest someone with a morbid curiosity on a Saturday morning. I've redacted the generic informational parts for brevity.

Complaint about Everyday Lending Limited trading as Everyday Loans

I’m getting in touch to let you know that I have completed my investigation of *********’s

complaint and I now have an answer for you. This assessment is based on the evidence

that’s been provided so far, however, if there’s any further information you want me to

review, the please send this to me by 16th September 2022.

From what I’ve seen you provided ********** with an unsecured personal loan of £3500 in

November 2021. According to the agreement, the loan was scheduled to be repaid in

instalments of £210.44 over a period of 48 months. The loan was still outstanding as of July

2022.

Having reviewed all the evidence that’s been submitted in this case, I don’t think the loan

should have been issued to ********. I’ll now explain why I think this is the case and what

I think you should do to put things right.

What we think about when looking at complaints about unaffordable or irresponsible

lending

You provided ******* with a high-interest loan, and you needed to make sure that you

didn’t provide it irresponsibly. In practice, what this means is that you needed to carry out

proportionate checks to be able to understand whether any lending was sustainable for ********** before providing it.

What I think this means for this case

From reviewing the evidence that’s been submitted, you carried out some checks on ********* financial circumstances before you approved the loan to him. You asked ******** to submit his recent bank statements whilst you carried out a check on his credit file

through the reference agency Experian. You also used data from the ONS to calculate *********’s total monthly expenditure. Considering all this, along with the term and cost of the

loan, I think your checks were proportionate enough on this occasion.

The results of your checks showed that *********’s monthly income was £1590.17 and his

monthly rent payments were £650 as reflected on his bank statements. Meanwhile, you

calculated *********’s total monthly expenditure to be £513.28 based on data received

from the ONS. And while *******’s bank statements showed no gambling or adverse

transaction activity, they did show he was heavily into his overdraft, only being brought out

by his wages and then going back into his overdraft shortly afterwards.

The results from the Experian credit check showed ******** had no adverse information

recorded on his credit file when he applied for his loan. The results also showed he had five

credit cards outstanding at the time. As two of these credit cards were to be consolidated by

the loan, ********’s repayments towards his remaining credit cards reduced to £179.19 a

month. This means that ************ would have been left with a disposable income of £37.26

each month after his loan repayments had been deducted.

I think your loan wasn’t affordable for him,

and that you acted irresponsibly in approving this loan to him given what you knew about his

circumstances at the time.

What should you do to put things right?

In this case, I think it’s fair that ********* should only have to repay the money he borrowed

and had the use of. Therefore, I think you should refund all of the interest and charges ********** has paid on the loan.

While I think it’s fair that *********’s credit file is an accurate reflection of his financial

history, I don’t think it’s fair that he should be disadvantaged by your decision to lend

irresponsibly. Therefore, under the circumstances, I think you should also remove any

negative information recorded on ********* credit file.

† HM Revenue & Customs requires you to take off tax from this interest. You must give ********** a certificate showing how much tax it’s taken off if he asks for one.

Next steps

I think this is a fair outcome in the circumstances, for the reasons I’ve explained. Please let

me know by 16 September 2022 whether you agree to my recommendations so the case

can be resolved.

But if you don’t accept what I’ve said – and want an Ombudsman to make a final decision on

the complaint – you must provide any further evidence or representations by

16 September 2022. Requests for more time must also be made by that date. If I don’t hear

from you by 16 September 2022 I’ll arrange for an Ombudsman to determine the complaint.