Payday lender Dollar Financial UK is to pay £15.4 million in compensation to some 147,000 customers, after the Financial Conduct Authority (FCA) identified issues with its affordability checks, debt collection practices and other systems & procedures.
Dollar – which uses the trading names The Money Shop, Ladder Loans, Payday UK and Payday Express – was forced to pay £70,000 in compensation back in July 2014, when the FCA identified that some customers had received more than the firm’s usual maximum loan after a system error. At the same time, the FCA announced that it was commissioning a Skilled Person to report on Dollar’s affordability assessments and debt collection practices.
The FCA says that the Skilled Persons report identified that “many customers were lent more than they could afford to repay,” hence this announcement regarding the payment of a significant amount of additional redress. No specific details are provided of the failings identified by the regulator with Dollar’s collection practices.
The redress is due in respect of the period April 1 2014 to April 30 2015 for affordability issues, and the period from January 1 2013 to April 30 2015 in relation to collections issues.
As a result of the FCA’s intervention, the lender will now provide a cash refund to around 65,000 customers, will reduce the balance owed by around 67,000 others, and effect both a refund and a reduction in the balance for a further 15,000 or so. Affected customers do not need to take any action, and will be contacted by the firm in the near future. Unless otherwise notified, customers should continue making payments on their loans as scheduled.
Dollar has now made a number of changes to its lending criteria.
Jonathan Davidson, Director of Supervision – Retail and Authorisations at the FCA, said of Dollar’s case:
“The FCA expects all credit providers to carry out proper checks to ensure that borrowers don’t take on more than they can afford to pay back. We are encouraged that Dollar is committed to putting things right for its customers.”
Stuart Howard, chief executive of Dollar, said: “I accept the findings of the review and apologise to anyone who may have suffered difficulties as a result.”
The latest action follows a number of previous FCA actions against payday lenders since it took over as consumer credit regulator in April 2014:
• In August 2015, Ariste Holding Limited (trading as Cash Genie) announced it was to pay £20 million in compensation regarding issues with the firm’s fee charging practices and its stance on rolling over loans
• In August 2014, Wonga wrote off a significant number of loans, on the grounds that the customers concerned would not have received loans under the lender’s new affordability assessment criteria
• In June 2014, Wonga announced it would be paying £2.6 million in compensation to 45,000 customers who received debt collection letters from the firm which appeared to come from law firms, firms which do not in fact exist
• In May 2014, The Cheque Centre exited the short-term credit market after the FCA found fault with the firm’s conduct
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.