In March 2013, payday lender MCO Capital Ltd finally had its Consumer Credit Licence withdrawn by its regulator the Office of Fair Trading (OFT). MCO used various trading names which included Helploan, Balance Loan, Speed Credit, Paycheck Credit and Pop Credit. The OFT originally announced its intention to withdraw MCO’s licence in August 2012, but it was seven months later before MCO announced it was withdrawing its appeal against this decision. MCO becomes the first UK payday lender to lose its licence.
On 20 March 2013, visitors to the Help Loan homepage were greeted by a simple message stating that the firm had ceased trading and thanking their ‘loyal customers.’ A telephone number for enquiries was given. No mention is made on the site of the reason for ceasing to operate.
The OFT announced its intention to ban MCO, and to fine the company £544,505, after it found evidence of deficiencies in its anti-money laundering controls, which allowed the company to be used by fraudsters. The criminals took out over 7,000 loans in the names of MCO customers, and even though the company was aware that these customers may not have wanted to take out a loan, it still pursued them for payment. When the OFT asked them to cease this practice, it ignored their request. In addition, the OFT said: “MCO lacked the necessary skills, knowledge and experience to run a consumer credit business.” MCO still intends to appeal against the fine.
In November 2010, the Daily Mirror newspaper suggested MCO was quoting the wrong Annual Percentage Rate on its advertisements, and that the correct rate should have been a staggering 109,384%.
OFT director of credit David Fisher commented on his organisation’s decision by saying: “Removing MCO’s licence is a timely reminder that payday and other lenders risk losing their licences if they engage in unfair business practices. The way MCO chased consumers for debts they did not owe was unacceptable and caused unnecessary distress to many people.”
Gillian Guy, chief executive of charity Citizens Advice, which has campaigned vigorously against certain practices of payday lenders, described the news as a “victory for consumers.”
Earlier in March 2013, the OFT gave 50 leading payday lenders 12 weeks to improve their practices or face enforcement action, so MCO may not be the last payday lender to be stripped of their licence. The results of the OFT’s compliance review revealed widespread concerns about the way lenders communicated with and treated their customers, and with the lack of checks some lenders carry out before granting a loan.
Furthermore, any lenders for whom the OFT decides to revoke the licence in future may be forced to cease trading immediately. MCO was allowed to continue offering loans for seven months following the regulator’s decision while it decided whether to appeal. However, in February 2013, the OFT gained the power to revoke a licence with immediate effect in serious cases where it believes this step is necessary to protect the public.