Unaffordable loan complaints: steps and letter templates
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This information and enquiry service is not a full financial assessment or a guarantee of suitability or debt write-off. Debt solutions are not suitable for everyone. Fees may apply, and your credit record and assets may be affected. Get advice on your circumstances before choosing a solution.
MoneyNerd introduces enquiries to The Debt Advice Service and may receive a referral fee. For free, independent guidance and help finding a debt adviser, visit MoneyHelper.
This information and enquiry service is not a full financial assessment or a guarantee of suitability or debt write-off. Debt solutions are not suitable for everyone. Fees may apply, and your credit record and assets may be affected. Get advice on your circumstances before choosing a solution.
How to raise an affordability complaint, explain the evidence and check the Ombudsman’s process. A refund is not guaranteed.
What is an “unaffordable loan”?
If you couldn’t make repayments without borrowing more from another loan or credit card, then your loan was probably “unaffordable”.
The Financial Conduct Authority says:
“the borrower should be able to make the required repayments without undue difficulty, whilst continuing to meet other debt repayment obligations and reasonable regular outgoings.”
For the loan to be affordable, you should have been able to repay the loan AND have enough left over to pay other expenses such as rent, bills, food etc.
It should not cause you financial distress.
If you rolled over your loan or borrowed more soon after paying off your loan, or your loans were getting bigger each time and breaking the interest rate cap, this would be good evidence that the loan was unaffordable.
Also, if your loan was a significant part of your outgoings or missing some of the repayments, this is a good indicator that the loan was unaffordable and that your provider was loan mis-selling.
Here’s some extra ammunition…
The Financial Conduct Authority has made it clear how lenders must behave. They recently came out with a list of rules. If you think the lender has broken any of these responsible lending practices, you could add them to your claim. Lenders must not:
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Refuse to negotiate with you if you are developing a repayment plan.
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Refuse to deal with a not-for-profit debt advice body, debt counsellor, debt management firm or with another person acting on your behalf unless they can demonstrate that there’s a good reason for doing so
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Pressurise you to pay a debt unreasonably – for example, within too short a period of time or in amounts you can’t afford
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Take disproportionate action to recover the debt, for example, initiating legal action unless they have fully explored other solutions.
- Make empty threats of actions which they don’t intend to take or are not entitled to take
Budget Advice
Understanding how to budget effectively can be crucial, particularly when facing the challenges of unaffordable loans.
I’ve put together this table that provides 10 simple tips that will help you lower your expenses.
| Budgeting Advice | How You Can Lower Your Expenses |
|---|---|
| Arrange a Debt Repayment Plan | To negotiate, contact your creditors via phone, email, or letter to explain your financial situation, and offer to pay an amount you can afford. |
| Save on Utility Bills | Compare energy providers to find a cheaper deal. Use energy-efficient appliances. Reduce water usage with low-flow fixtures. |
| Save on Groceries | Shop with a list to avoid impulse buys. Buy store brands instead of name brands. Look for sales and use coupons. |
| Cut Back on Non-Essentials | This includes dining out, entertainment, subscriptions, and luxury items. Look for free or low-cost entertainment options and cook meals at home. |
| Transportation Costs | If possible, use public transportation, carpool, or consider biking to work. If you own a car, maintain it regularly to avoid costly repairs. |
| Negotiate Bills | Contact service providers (like phone, internet, and cable) to negotiate a lower rate or switch to a cheaper plan. |
| Consolidate Debts | Compare the full cost and term before using new credit to repay debts. Fees or a longer term may increase the total paid, and securing debts on your home puts it at risk. Seek free debt advice if payments are already unaffordable. |
| Sell a Financed Car | If the finance company owns the vehicle under hire purchase or PCP, you cannot sell it without its permission or first settling the finance. Ask for a settlement figure and advice on your options. |
| Use Cash Instead of Credit | To avoid accumulating more debt, use cash or a debit card for your purchases. |
| Seek Professional Advice | If you’re struggling, consider contacting a debt advice service like StepChange or National Debtline. They offer free, confidential advice. |
If you still find yourself struggling to make ends meet, there’s no harm in exploring other options. In the next section, we’ll talk about how seeking a refund could be a solution worth considering, and I’ll guide you through the process.
How to gather evidence of an unaffordable loan
Compiling strong evidence to support your claim that a loan was unaffordable is essential for increasing your chances of a refund.
Here’s a detailed guide on how to gather the necessary documentation and submit additional proof:
- Bank Statements: Collect bank statements for the period you took out the loan. These statements should cover at least three to six months before and after the loan application. Look for income deposits, regular expenses (rent/mortgage, utilities, groceries, transport), and other outgoings showing your financial situation.
- Payslips: If employed, gather your payslips for the same period as the bank statements. These will help verify your income and provide a clearer picture of your financial stability.
- Benefits or Other Income Sources: If you received benefits, pensions, or had any additional sources of income, gather documentation to support these. This includes letters from the Department for Work and Pensions (DWP) or any other relevant authority.
- Credit Reports: Obtain a copy of your credit report for when the loan was taken out. Credit reports provide information about your credit history, including other loans, credit cards, and debts you had at the time. This will help paint a broader picture of your financial commitments.
- Loan Agreements and Terms: Keep copies of the loan agreement, terms, and conditions, showing the amount borrowed, interest rates, repayment terms, and associated fees.
- Correspondence with Lender: Save any emails, letters, or communications you had with the lender during the loan application or repayment process. This can include correspondence related to late payments, missed payments, or financial difficulties.
- Financial Hardship Evidence: If you experienced financial hardship during the loan period, gather documents that provide evidence of this. This could include redundancy letters, medical certificates, or any other relevant documents that affected your ability to repay the loan.
- Other Debts and Financial Commitments: List all other loans, credit cards, and debts you had when you took the loan. Include details of the lenders, outstanding balances, and repayment amounts.
- Budgets and Expense Sheets: If you kept any budgeting records or expense sheets during the loan period, include these to demonstrate how your income was allocated and if there was a financial shortfall.
How the introduction works
The Debt Advice Service can discuss your circumstances and explain available options, including their benefits, costs and risks.
Options depend on your circumstances. You decide whether to proceed.
Advertisement. MoneyNerd introduces enquiries; we do not give debt advice or recommend solutions. The Debt Advice Service, a trading style of Pacific Financial Solutions Limited, offers free debt advice with no obligation. Complete the enquiry form to share your details and request a call.
Some debt solutions have fees and may negatively affect your credit rating. MoneyNerd may receive a fee if you go ahead with a debt solution through The Debt Advice Service. For free, impartial guidance and help finding free debt advice, visit MoneyHelper.
How much money can I get refunded?
The result depends on what went wrong and the evidence. An upheld affordability complaint can lead to interest or charges being removed or refunded and relevant credit-file information being corrected. It does not automatically cancel the money originally borrowed.
Explain the remedy you are asking for, but do not assume a particular cash amount, refund multiplier or compensation rate. The Financial Ombudsman’s affordability guidance describes its approach.
Step 1 – Gather information
Keep account statements, the agreement, relevant bank statements and a record of income, essential spending and other commitments when the loan was made. Explain later financial changes separately from why the original lending decision was unaffordable. You do not need to wait for every document before raising the complaint.
You can ask for personal information through a subject access request. This is usually free, with a response normally due within one month; extensions and limited exceptions can apply. Keep the data request separate from a clear complaint so the firm knows both are being made.
Adapt this wording to your own facts:
“I am complaining about the affordability of loan [reference], taken out on [date]. I believe the repayments were unaffordable because [brief reasons]. Please investigate the lending decision and explain the checks carried out. Please provide the agreement and account information you hold about me. I will send any further evidence I can obtain.”
About The Debt Advice Service
Use the enquiry form to request a call about your circumstances and available options. You decide whether to proceed.
Advertisement. MoneyNerd introduces enquiries; we do not give debt advice or recommend solutions. The Debt Advice Service, a trading style of Pacific Financial Solutions Limited, offers free debt advice with no obligation. Complete the enquiry form to share your details and request a call.
Some debt solutions have fees and may negatively affect your credit rating. MoneyNerd may receive a fee if you go ahead with a debt solution through The Debt Advice Service. For free, impartial guidance and help finding free debt advice, visit MoneyHelper.
Step 2 – Send a simple letter
Use accurate figures and only include events that happened. Do not claim that a credit check was legally mandatory in every case, or that incorrect information supplied on an application can never matter. The checks should have been proportionate to the circumstances.
You can add the following to your complaint:
“At the time, my monthly income was approximately [amount]. My essential living costs and other commitments were approximately [amount], including [breakdown]. The proposed monthly loan payment was [amount]. I struggled to meet it because [facts, including any repeat borrowing]. I attach [documents]. I believe appropriate checks would have shown the difficulty. Please explain your decision and put right any loss or credit-file harm caused by unfair lending.”
Ask the firm to acknowledge the complaint. For most lending complaints it has eight weeks to issue its final response. The deadline generally runs from receipt of the complaint, not from every later evidence letter. Continue to seek payment support if the account is unaffordable; making a complaint does not automatically suspend payments.
Debt advice: Continue to the debt enquiry form
Advertisement. MoneyNerd is a commercial introducer, not a debt adviser. The Debt Advice Service, a trading style of Pacific Financial Solutions Limited, offers free debt advice with no obligation. If you request an introduction, your details are shared with them so they can contact you.
Some debt solutions have fees and may negatively affect your credit rating. MoneyNerd may receive a fee if you proceed with a debt solution through The Debt Advice Service. MoneyHelper offers free, impartial money guidance and help finding free debt advice.
Step 3 – escalate to the Financial Ombudsman Service
If you are unhappy with the final response, or the usual eight-week response period has expired, you can ask the Financial Ombudsman Service to consider the complaint. The service is free for consumers, but it first checks jurisdiction and time limits. Neither acceptance nor a refund is guaranteed.
You normally have six months from the firm’s final response to refer the complaint. Other time limits also apply to when the underlying complaint was raised. Check the final response and current Ombudsman time-limit guidance promptly.
If you got an offer that is smaller than expected
Read the offer carefully, including its scope, deadline and any full-and-final settlement terms. Ask the firm whether the offer remains available if you refer the complaint to the Ombudsman. Do not assume it cannot be withdrawn or that the Ombudsman must award more.
Check how any credit-file correction or remaining balance would be handled. Get advice if you are unsure what accepting the offer would settle.
Should I go to the Financial Ombudsman?
Consider referral if the response does not resolve your complaint or you disagree with its reasons. Explain why and supply accurate evidence. A rejection does not prove the firm acted dishonestly, and the Ombudsman can decide that a lender did enough.
There is no identical set of affordability checks for every loan. The information you supplied, what the lender knew and the scale of borrowing can all matter. If a lender has closed or entered an insolvency or redress scheme, check the relevant process rather than assuming the normal complaint route remains open.
The steps when you escalate to the Financial Ombudsman Service
An investigator will consider the evidence and explain their view. If the dispute remains unresolved, an ombudsman may issue a final decision. If you accept that final decision within the stated deadline, it becomes binding on the firm. Read the explanation and ask about anything unclear.
How to escalate your claim to the Financial Ombudsman Service
The first thing to note is that you should make a separate complaint for every company you’re dealing with. If you send it all together, it may confuse things.
There are lots of ways to send your claim to the FOS:
- phone
- post
- online
The FOS website explains very clearly the steps you need to take.
After you have submitted the claim
The Ombudsman will tell you what happens next and whether it needs more information. Timescales depend on the case and workload; do not rely on a fixed three-to-four-month completion promise. Keep contact details current and respond to requests by the stated dates.
References
