Urgent warning for more than 600,000 households with loans – take action now to get £100s in compensation
HUNDREDS of thousands of households who took out loans from a doorstep lender should take action now to reclaim compensation.
Borrowers who were mis-sold short-term doorstep loans offered by Morses Club have just months left to reclaim compensation.
The brand provided loans between £200 and £1,000 to Brits struggling to borrow through personal loans or credit cards.
It comes after the firm has already paid out more than £19million in compensation to borrowers who were mis-sold between January 2016 and August 2022.
The Financial Ombudsman (FOS) was upholding some 57% of complaints made against Morses Club in the first half of 2022 alone.
A review by the lender has quantified that over £112milluion in redress could be owed to customers if 40% of previous customers launched an affordability complaint.
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Sarah Williams, founder of , said: "A lender has to check that a loan is affordable for the borrower before giving the loan.
"Customers should consider making an affordability complaint if after taking out a loan they are left so short of money that they have to borrow more or get behind with their bills.
"Doorstep lending has often involved customers taking out a series of loans as the high interest leaves them unable to manage without more credit.
"So a lot of these cases were unaffordable and Morse Club, like other doorstep lenders, failed to make adequate checks."
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As a result of the findings and scope of compensation that could be owed, Morses Club proposed a "scheme of arrangement" which caps the total amount of money owed in compensation to customers.
The scheme was approved on Tuesday, May 30, and it now means that customers who were previously mis-sold Morses Club loans have until November 30 to submit a claim for redress.
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.
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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.