Payday loan company Sunny went into administration, affecting 50,000 customers.
The high-cost lending company blamed the impact of the coronavirus and an ongoing crackdown on the payday loan industry.
Borrowers are urged to continue making payments as usual or risk damaging their credit score or being hit with additional fees as a penalty for late or missing payments.
If your credit score suffers, it could hurt any future loan applications, for example if you’ve ever wanted to take out mortgages or even a phone contract.
Customers who are struggling to repay should discuss with the lender the possibility of arranging a more affordable plan to pay off the debt and speak with a debt counselor for free.
Sunny has appointed KPMG has directors to assist in the “liquidation of the company”.
What to do if you can’t repay a payday loan
HERE’S what you should do if you can’t repay a loan you’ve taken out, according to the Money Advice Service:
- Contact the payday lender as soon as possible – By law, they must suspend all repayments for a reasonable amount of time until you can work out a plan with a debt counselor to make repayments affordable. They can also freeze interest or suspend charges.
- Remember to cancel the recurring payment – But ONLY if you have spoken to the lender first. This can further damage your credit score, but if you need money to pay for things like food, rent, or utility bills, you may need to consider stopping payments. You should also get free debt advice before doing so.
- Refuse to renew your loan – The lender may advise you to “roll over” your loan to the next month, but this is a bad idea. That means you’ll have to pay even more fees and interest, so you’ll end up owing more. Instead, you should consider agreeing to an affordable repayment plan.
- Get help from a free debt advisor – If you don’t know how to deal with a payday lender or find it difficult to approach them, you can get free help from the following charities:
The company has around 143 employees, 32 of whom were made redundant today.
A statement on the website reads: “Customers should continue to repay existing loans in the usual manner.
“Customers should be aware that outstanding loans remain subject to the terms agreed with ECIL and that interest will continue to be charged.”
It’s the latest in a string of payday lenders calling it a day after one of the UK’s biggest short-term lenders, Wonga, disappeared in August 2018.
Since then, Piggy Bank, 247MoneyBox, QuickQuid, WageDayAdvance and Juo Loans have also called it a day, plunging millions of customers into financial uncertainty.
Many of them gave in to the influx of claims for irresponsible lending.
Latest figures from Sunny’s annual accounts for the year ending December 2018 show it was one of the largest payday lenders with a fifth of the market and took on more than 104,000 new customers throughout the year. ‘year.
But in 2020, it saw a significant drop in new customers, taking just 10,000 in the first quarter compared to 30,000 in the same period last year.
Its US-based parent company, Elevate Credit, Inc., attributed this to “ever-tighter customer accessibility regulations in the UK”.
Despite this, at the time the company said it “remains hopeful” that it could work with regulators to find a way to rebuild the business.
But in the last half of 2019, the Financial Ombudsman (FOS) – which handles consumer disputes – received 2,897 complaints about Sunny.
How to claim compensation from payday lenders
If you think you owe compensation from a payday lender, here’s how to claim according to financial blogger DebtCamel:
You will need to prove that you could not afford the loan when you took it. If having the loan meant you couldn’t pay your bills or other debts, you were irresponsibly loaned.
You may also be entitled to compensation if you have had late repayments, or taken out back-to-back loans as this shows that you really couldn’t afford to take out a new one.
Check your emails, bank statements, and credit scorer for evidence.
You will need to write a formal complaint letter to each lender explaining how you were loaned irresponsibly and include the evidence.
You will need to cite “unaffordable loans” and seek reimbursement of the interest and fees you paid, plus 8% Ombudsman interest on top.
Make copies of all evidence before sending it in case something happens to them.
Also request that the loan be removed from your credit report.
You can find a sample letter here.
Wait up to eight weeks to hear from them. If you are not satisfied with the answer, or they do not answer you, contact the financial ombudsman.
The FOS confirmed 76% of them – double the average confirmation rate for all cases reported to the ombudsman, which stood at 36% in the same six months, according to Debt Camel.
“Covid-19 will have been a problem for Sunny, as it has been for all lenders,” said activist Sara Williams, who runs Debt Camel, “but I think the main reason they’re having trouble is the cost of repayments to customers for unaffordable loans.”
Now that the company has gone bankrupt, compensation claims are in jeopardy.
Customers who have already submitted a claim may only recover part of what is owed to them, as the company may not be able to pay you in full.
Unaffordable loans can also be removed from your credit report.
Borrowers who believe they have been loaned irresponsibly but have not yet filed a complaint should do so promptly.
This is because when a company goes bankrupt, your compensation claim will be added to a long queue of people to whom the company also owes money and the big investors and lenders will be paid first.
Last year, an investigation by The Sun revealed that payday lenders were still charging double the amount lent by a payday lender.
Our Stop the Credit Rip-Off campaign has also seen the FCA crack down on “exceptionally high” lease-to-own products, as well as make a series of changes to overdrafts and introduce tougher rules for home lenders.