HUNDREDS of hard-up Brits are missing out on almost half of refunds from payday lenders to "rip-off" reclaim firms, based on an investigation by The Sun.
Reclaim firms, which often advertise during day time TV, replenish to 45 percent to assist borrowers claw back cash for mis-sold payday loans.
While claims firms are legally allowed to do this, this means customers can lose as much as lb450 on the lb1,000 claim – nearly half the total amount owed.
Payday loan complaints soared by 130 percent in the 2023/19 financial year when compared to previous year, with the Financial Ombudsman Service receiving 39,715 new complaints up from 17,256.
Just over half of these cases (53 per cent) were upheld by the Financial Ombudsman Service in favour of consumers.
But regardless of the city watchdog, the Financial Conduct Authority (FCA), capping the amount firms charge for PPI compensation claims at 24 percent there is no cap for other claims, for example pay day loan refunds.
Experts have slammed the firms for "ripping off" customers.
"Claims management companies just send out a typical email, they don't do anything whatsoever complicated and don't give individual support to clients. It's a rip-off," Sara Williams, debt adviser and founding father of the Debt Camel blog said.
Martyn James, consumer rights expert at complaints tool Resolver, said: "Payday loan compensation is a refund of massive charges and interest that pushed individuals desperate situations towards the bring.
"Taking a huge slice of cash for doing virtually nothing is deplorable."
Reclaim firms state that fees cost more than PPI claims since they're more complicated and funds reimbursed are lower.
They say the average payout is lb1,400 for payday loans, while MoneySavingExpert says typical PPI compensation is about lb3,000.
Borrowers are due compensation on the pay day loan when they were sold a loan they couldn't repay.
While PPI (payment protection insurance) would be a product put into loans or charge cards to pay for payments if customers fell ill or were made redundant.
This was often forced onto customers or they were sold unsuitable policies, but the deadline for reclaiming PPI ended yesterday.
The FCA has told The sun's rays that it's considering a cap on other kinds of reclaiming.
Simon Evans from the Alliance Of Claims Companies, which represents three from the firms one of them investigation (Ashley Howard, Allegiant Finance Services, and The Central Claims Group), says customers have many options with regards to reclaiming pay day loans.
He added: "They go into this with their eyes open with fees clearly displayed and perhaps the finger of shame should be on the payday loan lenders that gave out these unaffordable loans to start with."
Allegiant Finance Services, Blue Panda Finance, My Claim Solved, Redbridge Finance, and Sanderson Drake all said they're clear about fees to customers and that the complex nature of claims means they are more costly to process.
The Sun also contacted Ashley Howard, Steps for success Reclaim, Impakt Claims, Payday-Claim, PaydayLoansClaimback, Payday Refunds, and PDRC however they hadn't responded by the time of publication.
Earlier this year we warned that a large number of pay day loan clients are "tricked" out of full refunds after using claims firms with "misleading" ads.
But you are able to reclaim yourself. We spoke to some dad-of-two who had a lb3,750 refund for any lb600 pay day loan he couldn't afford.