Payday loan companies have long been criticised for offering extortionately high-interest rates to their customers – often people that are struggling to get by from month to month. Since the increasing backlash and complaints against these companies began a few years ago, many of them have fallen casualty and collapsed into administration – such as Wonga and QuickQuid. The latest company in this controversial industry to fall victim is short term lender, Peachy, and its parent company, Cash On Go.
Who is Peachy?
Peachy was one of the largest and most well-known payday loan companies in the United Kingdom and claimed to have lent money to more than two million people since it began operations ten years ago. However, it appears now that the payday lender’s customer base had been drastically inflated, with recent figures revealing it, in fact, had just 29,000 customers.
Peachy specialised in lending small amounts of money to customers over a short period of time – typically to tide hard-up people over until payday. Its loan amounts ranged from £100 to £1,000 in one transaction, and it claimed to approve the vast majority of people that applied. Able to pay out to customers on the same day – often in as little as 15 minutes – it was a popular option for those in need of quick cash.
Peachy’s loans were slightly different to those offered by typical payday loan companies such as Wonga; the latter required the customer to pay back the entire amount – plus interest – on their payday, yet Peachy enabled customers to spread the cost of replaying their loans over several months.
Paying the price
However, Peachy’s fast loans came at a significant price. Quoting an annual interest rate of 855% APR, many of its customers found themselves faced with the prospect of paying back at least double – even quadruple – what they borrowed. The eligibility criteria for taking out a Peachy loan was very low – all you needed was to have an income of more than £600 per month and be over 18. You had to have not had a CCJ in the past six years, and you must have had a UK bank or building society account.
Payday loans companies were thriving following the financial crisis of 2008. Financial institutions realised that many people were struggling to make ends meet, and the cost of living was putting their assets, such as real estate, at serious risk. Unfortunately, it was also becoming increasingly difficult to get a loan at that point in time, with access to credit reserved for the privileged few.
In stepped a new breed of short-term loan companies, claiming to offer a lifeline to those in need of cash to cover their monthly bills and unexpected expenses. This trend took off, as desperate people had few other companies to turn to, so lenders such as Peachy and Wonga were born.
However, in 2018, the government stepped in to clamp down on these short-term, high-interest loans. As a result, some companies were offering annual interest rates creeping into the thousands, with campaigners warning that this was putting the most vulnerable people at risk.
Capped Interest Rates Prevented Peachy’s High Profits
Following the intervention by the government and the Financial Conduct Authority (FCA), the rates a company could charge for a payday loan was then capped at 0.8% per day. In addition, the amount people had to pay back was also capped, meaning that they would never pay back more than double what they originally borrowed.
This cap was a major blow for firms like Peachy, whose customers could often end up paying the company many times more than what they borrowed. This was how the payday loan company posted hefty profits for several years on end. However, with the cap in place, the company struggled to recoup its costs from lending to high-risk borrowers.
What Does the Collapse Mean for Peachy’s Customers?
Peachy’s customers have long been unhappy about the way the company has treated them. Companies like Peachy had also suffered a high number of complaints in recent years, following the FCA’s 2018 intervention. Complaints were typically costly to resolve, which further added pressure to Peachy’s bottom line.
The complaints Peachy received were often about the way the company assessed the affordability of loans for its customers. Some borrowers, for example, claimed that the company carried out inaccurate background checks on their personal situations, meaning that they were given a loan that they weren’t able to afford to pay back in the long run. This then resulted in a vicious cycle; they missed payments because they couldn’t afford to pay it back, and then they gained more interest as a result.
Now customers have been told that they still must continue making repayments on their loans despite Peachy’s collapse. The firm claims that the terms and conditions of the loans still stand, and therefore payments are due as normal. As it stands, customers that miss payments will still have to face extra charges and interest – not to mention a bad mark on their credit files.
However, Peachy is no longer allowed to issue new loans.
Customers of Peachy may be entitled to a refund for all or part of the loan they took out. It has been found that some payday loan companies – including Peachy – were carrying out insufficient affordability checks on their customers. These checks should have been performed every month to check that customers can continue meeting repayments. If customers find themselves unable to afford to pay back the loan, they may have had their term extended – and therefore, a hefty amount of interest added. In this case, the interest added could be deemed unfair and due to inadequate affordability testing. In this case, customers could be entitled to a refund.
Customers who think they may be entitled to a refund on all or part of their loan should begin the claim process by first collecting evidence that they were wrongfully sold the loan or could not originally afford the repayments. Proof that you could not afford to take out the loan when it was originally issued to you includes evidence that you could not pay your essential bills, such as electricity and rent. Look back through your old bank statements and collect any warning letters from utilities or housing providers of missed payments. Once you have your evidence, you should write a formal complaint to Peachy saying that you were unfairly charged interest on the loan and present the evidence with your complaint.
In normal circumstances, you will need to wait up to eight weeks for a response from the loan provider. However, this response may be delayed with Peachy as it is going through the administration process.
What should customers do if they are struggling to repay their Peachy loans?
Unfortunately, any loans taken out with Peachy will still accrue interest until the balance is fully repaid. This means that it is imperative you continue to make the payments as you would have done. Those that do not think they can continue to meet the agreed monthly repayments of the loan should get in touch with Peachy’s customer service team via its support line – 0800 0124 743. The company’s administrators will be handling calls and will be able to advise what to do.
There may be help for customers that are suffering financially as a result of the coronavirus pandemic. Peachy’s administrators may be able to sort out a payment holiday for you, depending on your circumstances. Please note, there may be additional interest accrued as a result of any payment holiday, so customers should always check they can afford this if it is the case.
Customers should never take out further short-term loans to help them pay off their debts with Peachy. If in doubt, they should call the National Debtline for advice first. These experts are there to help people out of financial hardship and will be able to identify the best course of action.
What does Peachy’s demise mean for the short term loans industry?
The demise of Peachy is yet another blow for the payday loans industry and signals that this really is the end of an era for affordable, high-interest loans. The measures that are now in place to protect the most vulnerable of our society effectively mean there is little profit to be made for both new and existing players in this cloudy sector.
Failure to Spark Investor Interest
Peachy’s administrators, Smith and Williamson, have also said that the company had tried to secure new funding to get itself out of its crisis; however, it had been unsuccessful. So instead, the company will work with its administrators to wind down the business operations and start to notify all its creditors. Unfortunately, the fact that investors are also not interested in stepping in to help save Peachy is yet another sign that the payday loans industry may be coming to an end.