It sounds like a dream come true: getting a loan that you never have to pay back.
But that’s exactly what’s happened to thousands of customers in the northwest of England, after a payday lender went bust and wiped all of their debts overnight.
Fernwood Financial Limited, based in the northwest of England, is no longer lending and has now stopped all collections from clients.
It’s not all good news though, as scammers are already reported to be posing as the firm to prey on those looking for support. Here’s what we know so far and how to keep your financials safe.
How to get your Fernwood Financial loan cleared
The good news is, there’s not too much admin involved. If you’ve taken out a loan with Fernwood Financial Limited, you do not need to make any further payments.
‘Customers should cancel any automated payments with their bank and should contact the liquidators immediately if anyone contacts them seeking payment,’ says the Financial Conduct Authority (FCA).
The Liquidators are writing to all current customers informing them that their loan balances have been written off in full, but if you have questions get in touch with them – don’t wait for a call.
You can contact the liquidators via email on sk@aurorarecovery.co.uk and hello@aurorarecovery.co.uk, or by telephone on 01134 800397.
What is a payday loan?
A payday loan – also known as a short-term loan – is a type of borrowing designed to be paid back over a short period of time.
This might be over the course of a month, where the full repayment amount is taken when you get paid (hence the name), or over three months, with split repayments.
Amounts can vary between £50 and around £2,500, but the amount you can get will depend on your eligibility.
Because a number of payday loan companies offer borrowing to people with little to no credit history, their interest rates are higher as a result.
They’re normally considered one of the more expensive ways to borrow money, and are categorised by the FCA as ‘high-cost’.
Are debts usually wiped by companies?
If you’ve taken out a loan elsewhere – or are thinking about it – you might be reading this story with misty eyes, dreaming about the day it’ll happen to you.
But we need to hit you with a dose of reality: it probably won’t happen.
‘This is highly unusual in my experience,’ Freddie Winter, the financial planner known as Nice Guy Money, tells Metro.
‘Normally your debt is an asset of the loan company, and this is sold to another company during liquidation – meaning you need to keep paying the money back, just to a different company.’
It hopefully goes without saying, but you should therefore never take out a loan hoping this might happen to you.
‘These people getting their loans written off are incredibly fortunate and I hope they use this bit of luck to improve their financial position going forward to avoid using a payday loan company ever again,’ says Freddie.
What to consider before getting a payday loan
Whether you’re a Fernwood Financial customer looking for further funds, or someone considering your first payday loan, Freddie urges caution.
‘Payday loans should be an absolute last resort for anybody,’ he says. ‘They are sold as your friend in a difficult time but really, they are looking to profit and take advantage of your unfortunate situation or naivety for how expensive this debt is.’
Before considering a payday loan, he recommends cutting back on every non-essential first, as well as selling unwanted items and raising additional income where possible.
‘I’d also be speaking to my utility providers and landlord or mortgage lender to see if they can adjust your payment arrangements to help in any way they can,’ he adds.
‘I’d also be speaking with Citizens Advice before going down this road to see what help and support they can offer.’
If you still need this sort of finance, then have a concrete plan to pay it back as quickly as possible otherwise the financial pain is only going to get worse next month.
‘I honestly think payday loan companies (and even Buy Now, Pay Later companies) are the devil of personal finance and should be avoided like the plague,’ says Freddie. ‘They cripple any chance of a secure and confident financial future.’
Why you need to be aware of scammers
The FCA only announced the Fernwood news on Thursday, but there are already posts circulating on X warning that scammers are taking advantage.
If you’re contacted unexpectedly by someone claiming to be from Fernwood Financial or Aurora Recovery, the FCA advises ending the call immediately. Instead, contact the real liquidators using the details above.
