Some 500,000 customers who were mis-sold payday loans by collapsed lender Sunny may not receive any of their compensation entitlement.
KPMG, the company’s administrators, said it will reach out to the borrowers affected by email, and invite them to make a claim.
Elevate Credit International, Sunny’s parent company, built a “claims calculator” to identify customers who were potentially mis-sold loans and to work out which loans were likely to have been unaffordable.
Half a million of the firm’s 700,000 customers qualified.
However, KPMG warned that the funds available mean that customers receive nothing at all, or 1% at the very most, given the number of potential claimants.
KPMG said: “As a result, if a very high volume of claims and queries is received, it is likely that the operating costs of responding to queries and processing and adjudicating claims will become so high that no funds will be available for a dividend to be paid to creditors.
“If a lower volume of claims and queries is received and a dividend can be made, the dividend is likely to be a very low percentage of your claim. 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 £ and that any payment would likely be made in Spring 2021.”
Those who were mis-sold short-term high-cost loans will automatically have negative entries on their credit records cleared by the end of November.
Any notes of defaults on their first five Sunny loans will be cleared, and notices of any subsequent loans deleted entirely from their records.
Consumers who have already had their cases dealt with by the Financial Ombudsman can also file a claim for compensation. The deadline for such claims is set at the end of January 2021.
Sunny offered loans of between £100 ($132) and £2,500 at a representative annual percentage rate of 1,267%, capped at 0.8% a day.
The company was the latest in a string of collapsed loan providers to fall into administration in June. It blamed tougher regulatory pressure from regulators and economic uncertainty due to the coronavirus pandemic.
In October, some of the existing loan book was sold to Perch Capital while others were written off.
In 2018, payday loan giant Wonga went into administration after also facing criticism for its high-cost, short-term loans.
Debt advisor Sara Williams, who runs the Debt Camel site, 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."
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