Dollar Financial ordered to reimburse £ 15.4 million to customers | Payday loans
Britain’s second-largest payday lender was ordered to repay £ 15.4million to 147,000 customers after regulators discovered it was lending more to borrowers than they could afford to repay.
The Money Shop and other brands operated by Dollar Financial UK – Payday UK, Payday Express and Ladder Loans – have provided short-term loans at interest rates of up to 2,962%.
But the Financial Conduct Authority ordered the company to make cash repayments or reduce balances owed after it discovered that many borrowers were unable to repay the money and should not have received the payments. ready.
It comes a year after Wonga was forced to cancel £ 220million in loans to 375,000 borrowers who she says should never have received loans.
The dollar will give money back to 65,000 customers and reduce the balance owed by an additional 67,000 borrowers. A total of 15,000 people will receive both cash refunds and reduced balances.
The action follows an investigation by the Financial Conduct Authority that began in July 2014, when it dispatched a qualified person to verify whether Dollar was treating its customers fairly and whether they could afford to repay the loans on offer. . It came after an initial check revealed a number of rule violations by Dollar.
“The review found that many clients received more loans than they could afford to repay. The company has since agreed to make a number of changes to its lending criteria in order to meet FCA requirements for high-cost, short-term lenders, ”the regulator said.
The Money Shop has since cut its interest rate to a ‘representative’ 743%, although Payday UK still charges 1.192%.
Dollar Financial UK Managing Director Stuart Howard said: “I accept the findings of the review and apologize to anyone who may have encountered difficulties as a result. It is right that we put things back where they went wrong and I went beyond the review by reforming the way our business operates to reflect the business goal of being the lender of the day. more responsible in its market. “
Critics praised the FCA’s action, but said payday loans remained a “parasite”. Guy Anker, editor of MoneySavingExpert.com, said: “We knew that when Wonga got his wrist slapped twice last year after his horrific practices, it was only the tip of the iceberg.
“The payday loan industry has been a parasite in this country, it has lived in a regulatory vacuum for far too long. Fortunately, we have started to see a much closer examination of how these dangerous companies in this dangerous industry operate. And now their horrible practices are starting to catch up with them. “
Dollar is part of the US-based DFC Global Corp, ultimately owned by private equity giant Lone Star, founded by billionaire John Grayken.
The FCA said customers don’t need to take any action. Dollar will begin contacting clients immediately and expects to complete the recourse exercise by early 2016. This includes tracing people who have changed their contact details or bank account information.