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Finance

Will Customer Refunds Cause Problems For Morses Club?

High-cost UK lenders have had to pay back millions to customers and continue to do so. Customers of Morses Club, previously Shopacheck Financial Services, may be able to claim back millions. Morses Club is a high-cost UK lender that offers doorstep loans. Doorstep loans (also called home credit) are a kind of personal loan that can be delivered to borrowers in cash or deposited directly into their bank account. If you are a past customer of Morses Club, it is well worth finding out if you are eligible for a Morses Club refund.

High-Cost Loans

Many high-cost lenders have struggled with customers claiming refunds through claims management companies in the last few years. The most notable of these have been Wonga and Amigo Loans. Wonga ended up going bankrupt as a result. Amigo is insolvent and may follow if they can’t get a scheme approved for repayment (something Provident Financial are doing as well). The reason for these refunds is because, in most cases, the regulator decided they shouldn’t have lent to the customer in the first place as the customer couldn’t afford it. 

Borrowers who resort to using high-cost loans do so because they can’t afford to borrow. This is partly why the lower cost lenders won’t lend to them. Even if the borrower self declares expenses and income, lenders are expected to find ways of validating claims and make sure customers can pay interest and still afford basic living costs. This means lenders can still be found guilty of giving an unaffordable loan, even if the borrower lied on their application.

Irresponsible Lending

Irresponsible lending is when lenders offer loans that are unaffordable for the borrower. The Financial Ombudsman (FOS) states regarding affordability:

The relevant rules, regulation and guidance all refer to a borrower being able to sustainably repay any credit provided. And being able to sustainably repay credit is described as doing so without undue difficulty, while being able to meet other commitments and without having to borrow further.

This means borrowers should be able to afford repayments, as well as their basic living costs, bills and other debts, without further borrowing. So even if they always paid their loans on time, the loan could still have been unaffordable. Especially if the borrower had several loans at the same time or often had to refinance or top-up a loan.

High-interest loans are meant to be used to solve a short term problem. If an individual keeps rolling a loan or repaying one then getting another loan soon after, the lender should have stopped lending to them. Many lenders have been ignoring even very obvious signs of problems such as loans increasing in size or borrowing very soon after repayment.

Morses Club

As one of the largest UK doorstep loans providers, Morses Club provides small, short-term loans of £100-£1,500, over a loan period of 35 weeks to 52 weeks with an APR of up to 498.34%. They are a publicly listed company with a current market cap of around £63m, however, this is less than half of what it used to be.

Morses Clubs revenue has consistently been around £100m or higher over the last few years, peaking at £125m in 2020. Hundreds of thousands of these short-term, high-cost doorstep loans have been handed out over the last few years.

Morses Club Claims

There have been some high-profile cases of lenders having to give millions of pounds to customers in the form of redress to the point they become insolvent. There are many lenders that are still lending that will likely follow. One such lender is Morses Club. In recent figures from the Financial Ombudsman, 71% of complaints were upheld, meaning customers can claim back all interest payments on their loans. If this is reflective of the number of past customers that can claim refunds, Morses Club could end up paying millions back to customers. In their latest accounts, Morses Club had a complaints provision of £2m. However, with annual revenue over £100m for the last few years, the actual number could end up being a lot higher if some of their peers are anything to go by.

The borrower can ask for any poor payment records on loans deemed to be ‘unaffordable’ and be removed from their credit report if the claim is won. The credit reference agencies take instruction from the lender, so it’s up to the lender to request to remove them.

Claims can be made directly to Morses Club for free, or through a professional Claims Company, who will claim on the borrower’s behalf. Claims Companies (or CMCs) typically work on a no win no fee basis and take a fee of around a third of a successful claim. CMCs can make the process of getting a Morses Club refund easier and avoid mistakes that make reduce the likelihood of receiving compensation.

Making A Claim

One of the main indicators for the strength of a claim is the number and size of loans. The more loans that the borrower has taken out, the better the case. Borrowing for long periods by taking out new loans or refinancing existing ones shows the borrower is dependent on the loans. Also, the larger the loans are, the better the complaint is. If a borrower took out multiple loans, it’s normal to get the last few loans refunded, but maybe not the first few. However, these are just examples. Cases, where individuals have taken out just one loan have been won if that individual couldn’t afford the loan. Further examples of why an individual may be eligible for a claim can be found at The Claims Guide.

If the borrower wins their complaint, they get their interest and other charges refunded (or get the balanced reduced if they still owe money to the lender). On top of the refund, the borrower can also claim 8% interest per year on interest payments from the date they were paid to the date of settlement. This is basically interest on the loan interest plus any fees and charges that might have been charged. However, the borrower will still have to pay back the initial loan if they haven’t already done so.

The Financial Ombudsman (FOS) make the final decision when the lender and borrower can’t come to an agreement. They generally take a few months to come to a decision and doesn’t cost anything to the individual making the claim. The FOS will usually look at loans that are over 6 years old, but many lenders just refuse. 

Conclusion

Like payday loans, doorstep loans are a quick and easy option for those who can’t get a loan elsewhere. However, high-cost lenders seem to have an inherent contradiction in their business models. If an individual has been rejected by the low-cost lenders, then they likely have the characteristics which would classify them as unaffordable. In this case, giving that individual a loan would be classed as irresponsible lending according to the regulator. As a result, most of these borrowers would be able to claim a refund if they complain.

This may explain why so many high-cost lenders have become insolvent, as droves of past customers win compensation from their former lenders. Morses Club has a maximum interest rate of nearly 500% and hundreds of millions of pounds previously lent out. For these reasons, they could well be the next lender to have problems.

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