Loan Note Recovery: Can You Get Your Money Back?

A loan note is a loan you make to a company in return for regular interest payments. Loan notes are often issued by companies that aren’t regulated by the FCA, so if the company collapses, the FSCS usually won’t cover your losses. 

That doesn’t necessarily mean your money is gone for good. Under the UK’s Authorised Push Payment (APP) scam reimbursement rules, you may be able to recover your money by claiming through your bank, and through the Financial Ombudsman Service (FOS) if the bank refuses.

Below, we explain how loan notes work, the warning signs of a loan note scam, and how loan note recovery works if the firm you invested with has collapsed.

What is a Loan Note?

A loan note, sometimes called a debt note, is an agreement in which you lend money to a company in return for interest. The company is the borrower and you are the lender. It is a legal promise to pay you interest and to repay your original money on a set date, known as the maturity date.

Interest is usually paid at fixed intervals, such as monthly or yearly, or accumulated and paid at the end. The interest rate, the length of the loan, and the purpose of the money are agreed upon before you invest.

Companies use loan notes to raise money for various purposes, including property development, litigation funding, and business lending. Some large businesses issue corporate loan notes, but many loan notes sold to individual investors come from smaller, unregulated companies promising high fixed returns. Unlike shares, they usually cannot be sold early, so your money is tied up until the company repays it.

Sometimes the loan note schemes will have a security trustee like Blue Water Capital who have been the security trustee on alleged Ponzi schemes like Godwin Capital. 

Are Loan Notes Regulated or Protected?

Most loan notes are usually unregulated and in January 2021 the Financial Conduct Authority (FCA) banned the mass-marketing of speculative mini-bonds and loan notes to retail investors.

The FCA stated that they banned the mass-marketing of loan notes as they consider them too complex and high-risk for most ordinary investors. 

The ban doesn’t stop them being sold entirely. They can still be promoted to investors certified as sophisticated or high net worth, and some sellers push ordinary investors to sign these agreements without them knowing the risks associated. 

Because the issuer is usually unregulated, investors cannot claim against the company itself through  the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS) if it fails. The exception is where an FCA-authorised firm was involved, for example a regulated adviser who recommended the investment.  

A claim against the issuer is not the only option, though. If you were the victim of a scam, you may be able to recover your money from your own bank under the APP scam reimbursement rules. This is a separate claim and does not depend on the collapsed company.

Depending on what happened, the bank reimbursement route can be one of the most realistic, and cost-effective routes to loan note recovery. If it’s relevant to you, it’s almost always the best option for recovery and doesn’t require expensive up front fees or financial risks. 

Warning Signs of a Loan Note Scam

Loan note scams are becoming more common in our group action cases at Refundee. These are the warning signs we see most often:

• High fixed returns that are presented as safe or guaranteed.  
• Adverts on social media or online. Mass-marketing loan notes to ordinary investors has been banned since 2021, so an advert reaching you is itself a red flag.  
• Pressure to invest quickly, such as deadlines or “limited places”.  
• Contact from an introducer or broker rather than the company itself. They often take a large commission from your investment.  
• Being asked to sign a “sophisticated” or “high net worth” investor statement so the investment can be promoted to you, especially if you do not fit that category.
• “Asset-backed” claims with no clear evidence of what the assets are.  
• An FCA-regulated firm mentioned as proof of safety, for example as a security trustee, when the company issuing the loan note is not regulated itself.  
• Overseas listings or overseas regulation used to suggest legitimacy.  
• Limited information on what your money will be used for.  
• Unclear fees, or no clear explanation of what happens if the company fails.

Many of the warning signs mirror that of common investment scams, and they are designed to look convincing. At Refundee, we regularly see loan note scams operating like legitimate companies with registered offices, professional looking websites, conducting webinars and attending in-person events. 

A company looking legitimate doesn’t mean your money is safe. Being registered at Companies House is not the same as being regulated. Check the FCA Firm Checker before investing, and treat any unregulated company offering high fixed returns with caution. 

My loan note firm has gone into administration. What now?

An administration usually begins when there are major concerns about the cashflow or solvency of a company. When it happens, a licensed insolvency practitioner, known as the administrator, will take control of the company. Their job is to rescue the business if possible or, more often, sell what it owns and pay back creditors in a set order. In the cases we see, the rescue is not possible as the underlying investments are fraudulent. 

As a loan note investor, you are a creditor. But you will usually be an unsecured creditor, which means you are paid after secured lenders and certain other creditors, if there is money left at all. Payouts from an administration are often small, if anything at all and the process can take years.

If your loan note firm has gone into administration:

1. Keep the administrator’s letters. They may ask you to submit a claim, known as a proof of debt, so you’re included in any payout.
2. Gather your records: loan note certificates, contracts, emails, and bank statements showing your payments.
3. Don’t wait for the administration to finish. A claim against your bank under the APP scam reimbursement rules is separate, and can run at the same time. If you delay, you will likely miss important time limits on reimbursement.
4. Watch out for recovery scams. Fraudsters often contact victims of collapsed schemes claiming they can recover money for an upfront fee.

Refundee is helping several loan note creditors whose firm is currently in administration, including Godwin Capital, Woodville through our specialist group actions.

Your bank claim does not need to wait for the administration process to finish and both processes can run alongside each other. We’ve already recovered £85,000 for a Woodville client through the bank reimbursement process, even though the administration process is still ongoing. 

How to Recover Your Money From a Loan Note

If you’ve lost money on a loan note, you may have a chance of recovering the money through UK banking reimbursement rules.

If you sent the funds from a UK account then APP fraud rules, such as the Contingent Reimbursement Model (CRM Code) and the PSR’s Mandatory Reimbursement Model mean that you may have strong protections to recover your money.

Key parts of the Mandatory Reimbursement rules:

• You made the payment after the 7th of October 2024
• Your payment was sent to another UK bank account
• Maximum refund of £85,000 per claim
• Banks can deduct an excess of £100 (doesn’t apply to vulnerable customers)
• Victims must report the scam within 13 months of the last payment
• Banks cannot delay the claim indefinitely

If you sent your funds before October 2024 then you may still have protections depending on what bank you used to send the payment.

If your bank is signed up to the Contingent Reimbursement Model (CRM) Code and you meet the criteria below, you might be able to claim your money back:

• You made the payment from your UK bank account after the 28th of May 2019
• Your payment was sent to another UK bank account

Check our list of participating banks to see if yours is signed up to the CRM code.

Mandatory Reimbursement Model 13-month Reporting Deadline

If your payment qualifies for the Mandatory Reimbursement Model, there are important deadlines that you must meet to have any chance of being reimbursed by your bank. The strictest limit is the 13 month limit under Mandatory Reimbursement where you only have 13 months from your last payment to an investment to report the issue to your bank. 

Therefore, if you qualify for the MRR model you need to take immediate action and report this matter to your bank. If you miss this deadline and you paid on or after 7 October 2024, you will not be eligible for reimbursement.

Get in touch with Refundee for clear, honest guidance on your loan note recovery claim.

Do I Need a Solicitor For My Loan Note Recovery Claim?

No. A bank reimbursement claim is a regulatory process, not a legal one, so you don’t need a solicitor to recover your money. You complain to your bank, and if it refuses, the case goes to the Financial Ombudsman Service.

Suing a collapsed loan note firm is rarely worth it. By the time a case reaches court, the money has usually been spent or moved, so there may be nothing left to recover, even if you win. Legal action is also expensive, rarely offered on a no-win, no-fee basis, and can take so long that you miss the time limits for a bank claim.

What matters in a bank claim is knowing how banks and the Ombudsman assess evidence. Refundee’s team includes people who have worked at the Financial Ombudsman Service, the FCA and major UK banks. We’ve recovered more than £150 million for clients, with a large proportion coming from collapsed investment schemes, and we work on a no-win, no-fee basis.

You can see some examples of the large cases we’ve won – like Black Capital, Raedex, Gallant Building Services and many more – on the Group Actions section of our website. We’ve received coverage in the Times recently, after winning a case that opens up the potential for more than £100m of reimbursement. 

You don’t have to use a representative. You can complain to your bank and the Ombudsman yourself, for free, using our guide to claiming yourself. Find out why Refundee handles group actions differently from law firms.

Check out the current loan note cases we are helping with. Don’t see your scheme? Contact us today and we can provide a free case assessment. 

Start Your Loan Note Recovery Claim

If you’ve lost money to a loan note scheme then Refundee can assess your case on a no win, no fee basis. 

We specialise in this kind of claim and have recovered over £150 million for our clients, with a large share coming from group action cases involving loan notes, bonds and similar investments.

Large investment collapses are where specialist expertise matters most to your chances of success. Every case is different, and we cannot guarantee that a claim will succeed. What we can do is give you a clear, honest view of your options. You can read more about your options for recovering your money here.

You can also read more about why clients choose Refundee for group action cases on our blog - or through our verified TrustPilot reviews.

We work on a no win, no fee basis. We charge 15% + VAT, subject to a cap of £10,000 + VAT, and you only pay once you have your money back. You also have the right to claim yourself for free if you prefer.

Start your free eligibility check or call us on 020 4525 4600.

Refundee Ltd is authorised and regulated by the Financial Conduct Authority in respect of regulated claims management activity (FRN: 937096).