Sunny payday loan customers may get nothing in payouts

Half a million borrowers mis-sold payday loans by collapsed lender Sunny are likely to receive no more than 1% of their compensation entitlement.

Administrators KPMG are emailing all those who have a right to a payout, inviting them to make a claim.

But they are warning that the funds available mean they may not receive a penny, or 1% at most.

However, victims of mis-selling will automatically have negative entries on their credit records cleared.

This will be done automatically by the end of November, with any notes of defaults on their first five Sunny loans cleared, and notices of any subsequent loans deleted entirely.

That should help those struggling to access credit, as a result of their history with Sunny, having more success in the future.

• Wonga collapses into administration

• Payday lender's collapse to hit borrowers

Sunny was one of a series of high-profile payday lenders to have collapsed, mostly in response to a wave of complaints over the mis-selling of short-term, high-cost loans.

Many of these loans were found to have been unaffordable to repay, and should never have been granted.

Wonga was the most high-profile collapse in August 2018, followed by other big names in the sector such as WageDay Advance and QuickQuid.

Many of Sunny's payday loans were found to have been unaffordable to repay

Sunny, the brand name of Elevate Credit International Limited, fell into administration in June. In October, some of the existing loan book was sold to Perch Capital, and others were written off.

Administrators then assessed how many of Sunny's 700,000 customers had been mis-sold loans, and concluded that 500,000 had been affected and could make a claim. It is emailing all of them in the coming weeks.

Others whose cases have already been dealt with by the Financial Ombudsman, but have not received any payout, can also put in a claim for compensation.

All claims must be submitted by the end of January.

"Whilst the dividend will depend on the volume of claims and queries received, we estimate that any dividend payable could be less that 1p in the pound and that any payment would likely be made in spring 2021," the administrators said.

Debt adviser Sara Williams, who runs the Debt Camel blog, said: "Since Wonga went under, the figures have been emerging about the massive scale of payday loan mis-selling.

"These show how ineffective regulation was at preventing so many people being trapped in unaffordable debt for so long."