Reclaiming on a High-Cost Short-Term Loan
High-cost short-term credit, the FCA's own label for payday-style loans, comes with eye-watering interest because it is meant to be borrowed and repaid quickly. The trouble is that lenders often kept extending credit to people who were stuck in a cycle of borrowing, without checking whether the repayments were genuinely affordable. If that happened to you, you can reclaim the interest and charges you paid. It costs nothing and you keep the lot.
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High-cost short-term credit is a regulated category under the FCA, and lenders must follow CONC 5 on creditworthiness and affordability. The assessment had to be proportionate, and because this credit is so expensive, the bar for checking affordability rises the more you borrow and the more often you return. Repeat borrowing, rollovers, and loans taking a large slice of your income are all signs the Ombudsman treats as unaffordable lending. The standard redress is a refund of all interest, fees and charges you paid, plus 8% simple interest a year, with the principal still repayable. If the lender turns you down, or does not give a final response within 8 weeks, the Financial Ombudsman Service handles it for free.
Step by step
- 1Map out your borrowing history with the lender, flagging rollovers, back-to-back loans, and any loan that ate a large part of your monthly income.
- 2Get the evidence. Ask the lender for your loan history and affordability records, and send a free Data Subject Access Request if they drag their feet.
- 3Complain in writing that the lending breached CONC 5 affordability requirements, with the bar higher because of the high cost and repeat nature of the credit. Ask for all interest, fees and charges back plus 8% simple interest a year.
- 4If you are rejected or hear nothing within 8 weeks, escalate to the Financial Ombudsman Service via their free online form, attaching the complaint you sent the lender.
What they'll say, and your comeback
“You knew the loans were high cost when you took them out.”
Comeback, Knowing the cost is not the point. The lender still had to check under CONC 5 that the repayments were affordable for me. The high cost actually raised the standard of checking required, it did not lower it.
“Each loan was assessed individually and passed.”
Comeback, Assessing loans in isolation ignores the pattern. When someone keeps returning to borrow, a proportionate assessment has to take that history into account, and the Ombudsman expects exactly that.
“We offered you a repayment plan, so the complaint is settled.”
Comeback, A repayment plan does not address whether the lending was affordable in the first place. I am entitled to a refund of interest and charges on irresponsible lending, separate from any arrangement to repay the principal.
FAQ
What exactly is a high-cost short-term loan?
It is the FCA's term for short-term credit at a high interest rate, the category that covers payday and similar loans. The same CONC 5 affordability rules and the same refund of interest plus 8% simple interest a year apply across the category.
How far back can I claim?
There is no fixed cut-off for affordability complaints, though the Ombudsman applies time limits in some cases, including a general rule that you should usually complain within six years of the event (or within three years of when you became aware of a problem). The safest move is to complain now. If lending continued over years, the whole chain can often be considered together.
Ready to get your money back?
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A self-serve tool, not a law firm. General information, not legal advice.