THOUSANDS of borrowers who took out loans from a major doorstep lender are being offered surprise refunds.
Customers of Morses Club could get cash back if they’re still paying off a loan and had a complaint about its costs upheld.
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It comes after 90,000 current and former customers launched claims for compensation after being mis-sold loans.
But some of these borrowers who have already had their complaints upheld are now getting notifications that they’re owed a refund in 30 days before any remaining compensation is paid next year.
The surprise refunds are being handed out to customers who are still paying off a loan but have been offered compensation that’s worth more than their remaining loan repayment costs.
For example, if a customer complained and is told that they’re due £1,000 in compensation but had a remaining balance of £400 on a current loan in May and hasn’t made a payment since this date – the remaining debt balance will be wiped and taken off the total amount of compensation owed.
The doorstep lender has said that over 5,000 customers in these circumstances will receive a refund within the next 30 days.
It comes after a review by Morses Club found over £112million could be owed to customers who complained about affordability.
Thousands of customers have since launched claims for compensation after being mis-sold short-term loans worth between £200 and £1,000.
The lender estimates that over 600,000 are potentially affected by mis-selling and could make a claim for compensation.
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Morse Code has now started contacting customers who have had claims upheld about the refunds via email.
But Sara Williams, founder of Debt Camel, has warned that the emails going out to customers may not be clear enough that this refund of cash forms part of a customer’s claims for compensation.
It refers to customers getting paid compensation for the affordability claims in the fourth quarter of 2024, but later says customers will also get “a refund” paid in 30 days and asks everyone to give their bank details.
Anyone contacted by Morse Club is being urged to read messages carefully, as they must take action to get the cash.
Customers could be due £100s back in cash and must give their bank details to the lender so it can be processed.
If your claim was upheld because Morses Club found you were missold a loan, you’ll receive the remainder of your compensation in the last quarter of 2024.
The redress scheme was approved on Tuesday, May 30.
Anyone who thinks they are affected can still make a claim for compensation by November 30, and could be offered a refund on top too.
Who can claim under the scheme?
Around 618,000 Morse Club customers can apply for redress if they think that they were mis-sold a doorstep loan.
You’ll be eligible to claim under the scheme if you think you were mis-sold a Morses Club between April 1, 2007, and August 2, 2022.
If your affordability complaint falls outside of these dates you’ll have to complain through the Morses Club’s usual complaints policy by emailing [email protected].
How do I make a complaint through the scheme?
Morses Club has attempted to contact all its existing and previous customers.
You might have received a letter, e-mail or text message about the scheme.
This includes a Scheme Reference Number (SRN) needed for you to claim on the proposed Scheme.
But if you have not received a letter, e-mail or text message confirming your SRN, you should contact the Morses Club scheme by emailing [email protected] or calling 0333 011 0688.
Once you have your SRN number to hand you’ll be able to send a claim after setting up a Portal Account on the Morses Club Scheme website.
Customers have until 5pm on November 30 to submit their claims to the scheme.
Sara Williams has warned borrowers not to sign up with claims firms to help reclaim any cash owed.
She said: “It is very easy to submit a claim yourself.
“If you sign up with a claims firm, they will take a large amount of your refund just for entering your details into the scheme.”
How much compensation could I get back?
The exact amount of redress you’ll get back will depend on the size of your original loan and how much interest you were charged.
But it’s important to note that the total amount of payouts will be capped as the firm only has a limited pool of money to offer in redress.
Morses Club expects to pay out at least £20million back to borrowers – but this is an estimate and the exact amount hasn’t been confirmed.
Any compensation owed is expected to be paid to customers in the middle of 2024 after all claims and decisions have been decided.
How do doorstep loans work?
Doorstep lenders offer customers with bad credit cash loans, usually between £200 and £1,000, though some will go up to £1,500.
Most doorstep lenders insist that customers pay back the loan over a minimum of 39 weeks up to a maximum of 52 weeks.
For example, if you borrowed £500 from Morses Club today, you’d pay £23.70 a week over 39 weeks.
You can’t pay the loan back sooner than this, so in total the minimum you pay back is £924.30.
This is because the annual percentage rate (APR) is an eye-watering 498.78% compared to a typical credit card APR of around 30%.
A personal loan from one of the big banks or building societies comes with an APR as low as 4.9%.
But to qualify for a credit card or personal loan, you have to have a good credit score.
We first called for an end to rip-off interest rates charged by doorstep lenders in 2018.
A Sun investigation showed first-hand how a Morses Club agent failed to make adequate affordability checks back in 2018.
The agent offered a £300 loan to a customer with a £15 weekly repayment rate, despite the fact that he had just £16 a week spare cash to live on.
What are the alternatives to doorstep loans?
While doorstep lenders may feel like the only option for some, it’s important to know about other alternatives.
There are cheaper cash loans available – even if you have bad credit.
Community lenders and social purpose lenders and credit unions will almost always charge much less interest and let you pay back over a longer time if you need to.
That’s because they’re not looking to make any profit – unlike doorstep lenders.
Some of these include Fair Finance, Fair for You, Five Lamps, Lancashire Community Finance, Moneyline, Salad Money and Scotcash.
