Refunds
Can you claim back interest on payday loans?
How an unaffordable lending complaint works, what redress can cover, and why you do not need a claims company.
Written by the UKPayday editorial team
Updated 10 August 2026
14 min read
The short version
- A high APR alone is not grounds for a refund.
- The complaint is about unaffordable or irresponsible lending.
- Complaining to the lender, and then the Ombudsman, is free.
- Redress may reduce a balance rather than reach your account.
You may be able to claim back payday loan interest if the lender should not have approved the borrowing.
The fact that a payday loan was expensive is not enough on its own. Payday loans are designed as high cost credit, so a high APR does not automatically prove that the lender did anything wrong.
A stronger complaint is based on unaffordable or irresponsible lending. In simple terms, you are saying the lender approved credit that you could not repay sustainably and that reasonable checks should have revealed the risk.
You can make this complaint yourself for free. You do not need to employ a claims company or solicitor.
The question that decides most complaints
A payday loan refund complaint normally turns on one question:
What did the lender know, or what should it reasonably have discovered, when it approved the loan?
The decision must be assessed using the circumstances that existed at the time. It is not enough to show that your finances became worse several months later because of an event the lender could not have predicted.
However, a lender may have had reasons to look more carefully if your application or credit history showed signs of existing financial pressure.
These could include:
- Several recent payday loans
- Regular missed payments
- Existing defaults
- A large amount of income already committed to debt
- Repeated applications to the same lender
- Increasing loan amounts
- Borrowing again shortly after repaying
- Using new credit to repay previous credit
- Information suggesting your expenses were too low to be realistic
- A repayment that would take a large part of your income
The Financial Ombudsman Service considers whether the lender completed reasonable and proportionate checks. It then considers what better checks would probably have shown.
Its current explanation of unaffordable lending complaints confirms that each case is assessed using its own facts.
What unaffordable means in this context
A borrower might technically find enough money to make a payment and still have an unaffordable loan.
The real test is whether the loan could be repaid sustainably.
Sustainable repayment generally means paying without having to:
- Borrow again
- Miss rent or mortgage payments
- Fall behind with Council Tax
- Delay energy payments
- Go without normal living costs
- Sell essential belongings
- Use another form of credit to fill the new shortage
- Suffer a serious negative effect on your financial position
For example, you may have repaid a payday loan on time by using an overdraft. The lender's account will show a successful payment, but your bank statements may show that the repayment simply moved the debt elsewhere.
That can be relevant evidence.
The FCA rules require lenders to assess creditworthiness before providing regulated credit. The assessment must consider both the risk of nonpayment and the risk that repayment could negatively affect the customer's financial situation. These requirements are set out in the FCA creditworthiness rules.
One loan can lead to a valid complaint, but a sequence often tells more
There is no rule saying you must have taken a certain number of payday loans before you can complain.
A single loan might have been clearly unaffordable if the amount, repayment and information available made the risk obvious.
However, complaints involving repeated borrowing can provide a clearer picture.
A lender may not have had a reason to conduct extensive checks for a first small application where the available information looked reasonable. The position may change after several loans.
If someone borrows repeatedly, requests larger amounts or returns immediately after each repayment, the lender may need to consider whether the customer has become dependent on credit.
The FCA has identified repeat lending as an area of particular risk. Its review of relending by high cost lenders found that increasing debt and repeated borrowing could cause financial difficulty.
This does not mean that every later loan must be refunded. It means the lender should respond appropriately as the pattern becomes clearer.
Signs that could support your complaint
A complaint is more persuasive when you connect the lender's decision with clear evidence of financial harm.
Relevant circumstances might include:
- Your account was already regularly overdrawn
- You had other short term loans at the same time
- You were using one loan to repay another
- Your essential spending left little or no disposable income
- You had recent arrears, defaults or payment arrangements
- You borrowed from the same lender repeatedly
- The amount borrowed increased over time
- You applied again very soon after repayment
- You missed important household bills to pay the lender
- The lender continued to approve loans after you reported payment difficulty
- The income or expenditure figures used by the lender were clearly implausible
- Better checks would have shown the repayment was not sustainable
Do not simply send a long list of every financial problem you have ever experienced. Focus on what existed when each loan was approved and what the lender could reasonably have discovered.
Reasons that do not guarantee a refund
Some facts may feel unfair without proving that the lender acted incorrectly.
A complaint will not automatically succeed just because:
Every lender makes its own decision. The fact that one company upheld a complaint does not force another company to reach the same outcome.
Equally, repaying every loan on time does not prevent you from complaining. Bank statements could show that the repayments were only achieved by borrowing elsewhere or missing essential costs.
What evidence should you collect?
You do not need to prove the entire case before submitting a complaint. The lender should hold records of its own decisions and checks.
It is still useful to collect evidence that shows what your finances looked like at the time.
Your evidence file could include:
Old credit reports can be difficult to obtain. A current report may still show some historic information, but entries eventually disappear. Bank statements are often particularly useful because they show income, payments to other lenders, overdraft use and ordinary spending.
You can ask the lender for details of your borrowing history if you no longer have the agreements.
How to make the complaint
Send the complaint directly to the lender that provided the money.
Do not send an unaffordable lending complaint only to a broker or comparison service unless your complaint is specifically about something that business did.
Your complaint does not need complicated legal wording. It should identify the loans, explain why repayment was not sustainable and ask the lender to investigate.
You could write:
What you could write
I am making a formal complaint about unaffordable lending. When these loans were approved, I could not repay them sustainably without borrowing again, using my overdraft or missing essential costs. My borrowing history and financial position should have shown that further credit created a serious risk. Please investigate the checks completed for each loan, explain your findings and provide appropriate redress for any lending that should not have been approved. Please also correct any related information on my credit reports where appropriate.
Add specific facts from your own situation. A complaint written in your own words is more useful than a general statement copied without any personal detail.
Include your name, address at the time, customer reference and the loan dates if known. Never invent information or exaggerate what happened.
What happens after you complain?
The lender will investigate and issue a response.
For most financial complaints, the business has up to eight weeks to provide its final response. It might:
- Uphold the complaint in full
- Uphold part of the complaint
- Reject the complaint
- Ask for more information
- Make an offer without accepting every part of your argument
Read the calculation carefully if an offer is made. Check which loans are included and whether the proposed credit record changes are explained.
You do not have to accept an offer if you believe important loans or evidence have been overlooked. However, accepting an offer as full and final settlement may prevent you from asking for more later.
What can a successful refund include?
The purpose of redress is normally to place you as closely as possible in the position you would have occupied if the unsuitable lending had not happened.
Depending on the circumstances, this could include:
The result will depend on the decision and the individual loans involved. The Financial Ombudsman Service explains its approach to payday loan redress.
You should not normally expect the amount originally borrowed to be refunded. You received and used that money.
If you still owe the lender, any redress may first be used to reduce the outstanding capital balance. You might only receive a cash payment if the calculation leaves money remaining after the balance has been adjusted.
A refund is therefore not always paid directly into your bank account.
Will the payday loan disappear from your credit report?
Not necessarily.
If a particular loan is found to have been unaffordable, negative information connected with it may be removed. In cases involving a clearly unsustainable pattern, the Ombudsman may consider that all information about certain loans should be deleted.
The exact correction depends on the findings.
A lender agreeing to refund interest does not always mean every trace of the account must disappear. Read the final response to see exactly what the lender has agreed to report.
Credit reference agencies normally display information supplied by lenders. If the lender agrees to make a correction, allow time for its next reporting update. If the information remains incorrect, contact the lender and the credit reference agency with evidence of the agreed outcome.
What if the lender rejects your complaint?
A rejection is not necessarily the end of the process.
If you disagree with the lender's final response, you can refer the complaint to the Financial Ombudsman Service. The service is independent and free for consumers.
The Ombudsman may ask for:
- The application information
- The checks completed by the lender
- Your credit information at the time
- Income and expenditure figures
- Your loan and payment history
- Relevant bank statements
- Correspondence between you and the lender
It will consider what checks were reasonable, what those checks would likely have found and whether the lending caused a financial loss.
Another lender upholding a similar complaint does not decide your case. Each lending decision is assessed separately.
The complaint deadlines matter
You should complain as soon as possible.
The Financial Ombudsman Service says a complaint usually needs to be made within:
There can be exceptions, but you should not assume an old complaint will be accepted. The Ombudsman decides whether it has the power to consider the case.
Once the lender sends its final response, you will normally have six months from the date of that response to refer the matter to the Ombudsman.
The current deadlines are explained on the Ombudsman's complaint time limits page.
Do not leave the final response unanswered while you continue gathering every possible document. You can contact the Ombudsman within the deadline and provide further information as the case progresses.
What if the payday lender has closed?
Many former payday lenders have stopped trading. Some entered administration because they could not meet their liabilities.
If the lender is in administration, the normal complaint process may no longer apply. Check the company's official website and the administrator's notices. There may be a special claims process and a deadline for submitting complaints.
Even if a claim is accepted, there might not be enough money to pay the full calculated refund. Creditors in an administration can receive only a percentage of what they are owed.
Do not assume that the Financial Services Compensation Scheme will cover a payday lending complaint. Protection depends on the activity, the firm and the type of claim. Check directly with the Financial Services Compensation Scheme if you are unsure.
Be cautious of companies that contact you claiming they can recover money from a failed lender. Confirm the lender's position and the official claims route before sharing personal information or paying anything.
Do you need a claims company?
No.
Complaining to a lender is free. Referring an eligible complaint to the Financial Ombudsman Service is also free.
A claims company may charge a fee or take part of any refund. It will usually use the same lender and Ombudsman process that you can access yourself.
MoneyHelper warns that using a claims company can mean losing a significant part of the compensation. Its guide to claiming compensation for financial mis selling recommends considering a direct complaint first.
If you choose to use a claims company, check how its fee is calculated, whether VAT is added, when payment becomes due and what happens if redress is used to reduce an outstanding balance rather than paid in cash.
Can you complain if you gave incorrect information?
You can still make a complaint, but the incorrect information may affect the outcome.
The lender is allowed to consider the information you provided. If you substantially understated your expenses or failed to disclose debts, it may argue that its decision was reasonable based on the application.
That is not always the end of the issue. The wider information available to the lender may still have contained clear warning signs. The Ombudsman can consider both what you said and what reasonable checks should have discovered.
Be honest in the complaint. Explain why the figures were inaccurate and what your actual circumstances were.
UKPayday's role in a refund complaint
UKPayday is a credit broker, not a lender. We do not provide the loan, set its interest rate, collect repayments or decide whether lending is affordable.
A complaint about the decision to provide credit should normally be sent to the lender named in your credit agreement.
If your complaint concerns UKPayday's own service, communications or handling of your information, it should be sent directly to us through our complaints process.
The simple answer
You can claim back payday loan interest when there is evidence that the lender approved unaffordable credit or treated you unfairly. There is no automatic refund simply because the APR was high.
Build the complaint around facts. Show what the lender knew, what further checks could have revealed and how the repayments affected your finances.
Complain directly to the lender, keep evidence and watch the deadlines. If the lender rejects the complaint, the Financial Ombudsman Service may be able to review it for free.
Warning: Late repayment can cause you serious money problems. For help, go to MoneyHelper.
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