Collapse of a lender

I am genuinely curious here; reading this morning about the collapse of a payday lender - Payday lender's collapse to hit borrowers - the article states that there had been customers who had been mis-sold loans, and as a result were due compensation, but they were only likely to get a fraction of the compensation they were due as the company collapsed into receivership. People who still owed money to the company would still have to repay their loans presumably including the massive interest charges that these companies charge.

How is it that a company can basically get away with paying compensation, the company directors just walk away having made a small fortune, the administrators will also take their fee for winding the company up, and profit will still be made from customers whilst at the same time people that are owed money will see a fraction of it at best? I'd also like to bet that we as taxpayers will be paying for the redundancy of the staff concerned.

How can this be right?

 

It's a horrible situation.

From what I can deduce from the article the ones claiming compensation will only get a fraction of what they should get but with the borrowers and their existing loans it depends on whether their loans had been sold on to other loan companies. If they had been sold on then they would still be having to pay their interest as before. The implication is that those that hadn't been sold on would only have to repay the loan and there will be no future interest charges. It wouldn't surprise me if KPMG try to sell those loans on as well, but don't know if they will be allowed to do so.

Re redundancy: I would guess that there will be almost no liability for this as most of their staff will have been short term employees.

 

@Victoria there has been a lot of 'mis-selling' of insurance policies linked to loans. Quite often these have been included, with their charges, into the loan repayment without the borrower being told. It has been a massive problem for some years here and is not just perpetrated by the dodgy companies. Even building societies have been doing - but rarely. The big banks and insurers have had to fork out hundreds of millions in compensation, going back decades, and it I think it may have even run into billions! These were all what is known as PPI (Payment Protection Insurance) and most were 'sold' without telling the buyer.