How to claim compensation for mis-sold unaffordable credit on cards, loans and overdrafts


MILLIONS who have been mis-sold unaffordable credit on cards, loans and overdrafts could be due compensation. 

Even those who have already paid back what they owed could reclaim thousands if they can prove that repaying the debt was difficult on top of day-to-day living.

Millions who have been mis-sold unaffordable credit on cards, loans and overdrafts could be due compensation

Lenders have a responsibility to check whether a borrower can afford to pay back a loan before handing out credit.

More than half of complaints about unaffordable loans are upheld by the Financial Ombudsman Service, which rules on whether a customer is owed a refund. 

Debt adviser Sara Williams says: “Most people who get into a mess with money worry that it’s their own fault, but lenders shouldn’t hand out large limits.”

This week Rosie Murray-West explains who can reclaim – and how to do it.


ANY of the following products could be worth checking, according to Sara, who runs debt reclaim website Debt Camel:

  • Payday loans intended for short-term credit
  • Car finance loans
  • Guarantor loans where a parent or friend had to pay it back if you defaulted
  • Standard personal loans where the monthly repayment was unsustainable given your financial circumstances
  • Bank overdrafts that were increased without a financial check
  • Credit cards with high spending limits 

Even if you paid the loan back, or closed the bank account, you can still reclaim.


YOU won’t get back everything, but the ombudsman usually orders firms to repay you the interest you paid, any extra charges, plus eight per cent interest on top. 

You will still be expected to repay the amount you borrowed. 

As an example, a customer who borrowed £5,000 and paid back £250 over 36 months would be awarded £4,320, consisting of £4,000 of fees and charges and eight per cent interest.

It usually demands that any black marks on your credit record because of the debt are removed, too.


THERE’S no guarantee. However, the Financial Ombudsman upholds more than half of complaints about loans after lenders have declined to pay out, so the odds are in your favour.

The Ombudsman will make a decision that is legally binding on the company. But this can take more than three months so be prepared to wait.

If you still do not agree after the Ombudsman makes a ruling, your only option is to take the lender to court.

You need to keep in mind that you will have to pay legal fees – and these could cost thousands of pounds. Again, there is no guarantee you will win. 


IF the lender does not sort out your problem within eight weeks or you are not happy with its response, then you can take it to the Financial Ombudsman Service. 

The clock starts ticking from the moment you make that complaint, whether you do so by phone, in an email or by letter.

You must do this within six months of the company’s reply.

You can complain online, at Or call on 0800 023 4567.

Either way, your submission is free.


You should avoid firms which charge a fee to claim on your behalf as this will eat into any compensation and it won’t speed up the process

COMPLAIN directly to your lender first. You can do it yourself or use a free dispute resolution service such as Resolver ( 

You should avoid firms which charge a fee to claim on your behalf as this will eat into any compensation and it won’t speed up the process. 

Debt Camel has free template letters on its website if you choose to go it alone, as well as advice on how to customise them.

If your lender is bankrupt, the rules are somewhat different, and in some cases you may not be able to claim at all. 

Searching for the company name on the Resolver website should show you what to do in your specific circumstance.

The lender may immediately repay you. If it does not, it is worth fighting on.

When you complain, include evidence to show that you should not have been given the credit, because the lender should have been able to see that you could not afford it. 

Evidence might include bank statements from the time when you took out the credit showing that you had several loans already, or that you were a regular gambler.

You could also use your credit report from this time as evidence.

£442 Free groceries

THOUSANDS of cash-strapped families are missing out on supermarket vouchers worth up to £442 a year. 

The Healthy Start scheme gives low-income parents extra help to buy milk, vegetables, fruit, pulses and vitamins. 

You need to be at least ten weeks pregnant or have a child under four years old and be in receipt of a qualifying benefit to get the support. 

New applicants get a pre-paid card which is topped up with digital vouchers every four weeks. Parents can get between £4.25 and £8.50 a week – adding up to £442 a year. 

Data from website NationalWorld suggested that 115,000 are missing out on the free support. 

But with millions battling a crippling cost-of-living crisis, it’s vital to claim all the assistance you can. For more information visit

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