QuickQuid, the UK’s largest remaining payday loan provider, is set to close even though thousands of complaints about its lending have not yet been resolved.
US owner Enova said that QuickQuid will leave the UK market “due to regulatory uncertainty”. The collapse means that thousands of borrowers who said they were missold unaffordable loans will only get a proportion of the payouts they would have been due.
In the first six months of 2019, customers filed more than 3,000 complaints about the company with the financial ombudsman. According to CashEuroNet, which trades as QuickQuid, this along with a crackdown on predatory lending caused the company to go into administration.
Details of QuickQuid’s demise
Enova will take a one-off after tax charge of around £58 million, which includes a cash charge of £33 million to support the end of its lending in the UK.
A statement from the firm read: “Over the past several months, we worked with our UK regulator to agree upon a sustainable solution to the elevated complaints to the UK Financial Ombudsman, which would enable us to continue providing access to credit,” said Enova boss David Fisher.
“While we are disappointed that we could not ultimately find a path forward, the decision to exit the UK market is the right one for Enova and our shareholders.”
Reasons for payday sector collapses
Following an outcry from charities and consumer campaigners, the payday sector has faced tougher rules in recent years from City regulator the Financial Conduct Authority (FCA). For example, a cap was placed on the amounts payday lenders were allowed to charge and they have had to meet the FCA’s stricter standards in order to continue operating.
However, this has caused several lenders such as Wonga and the Money Shop to cease trading – QuickQuid was bigger than the former even before it folded in August 2018.
“It’s important to understand the payday loan industry was built on the back of marketing, not need,” said Martin Lewis, MoneySavingExpert.com founder. “Normally when firms go bust, the fear is diminished competition. Not here. These loans were unneeded, unwanted, unhelpful, destructive and addictive.”
What QuickQuid’s closure could mean for customers
Even though Enova claims to have lent to more than 1.4 million people in the country, it did not clarify what will happen to its UK customers. According to the administrator Grant Thornton, customers should carry on making repayments. It has even published FAQs on the QuickQuid website with advice and information.
QuickQuid customers who believe they may be owed compensation can contact the Financial Ombudsman Service (FOS) to make a complaint. But as the Ombudsman explained:
“We will be working with the administrators of the company to understand what that means for consumers, but it is unlikely that we will be able to progress any existing complaints about CashEuroNet any further, or look at any new complaints about it. Once we have clarity on this from the administrators of the firm, we will be writing to people who currently have cases against CashEuroNet with us to advise them on what they should do.”