Payday lending firm CFO Lending is to pay £34.8 million in compensation after the intervention of the regulator, the Financial Conduct Authority (FCA). The firm was responsible for a number of serious failings in a number of areas.
£31.9 million of the compensation will be given in the form of write-offs of outstanding balances, and only £2.9 million will be in the form of cash payments. Some 97,000 customers are affected.
CFO, which also offered a number of guarantor loans alongside its main payday loan business, used the trading names Payday First, Flexible First, Money Resolve, Paycfo, Payday Advance and Payday Credit.
The many and varied issues identified at CFO by the FCA included:
• Computer systems showing incorrect loan balances, leading to customers making larger repayments than they should have
• Taking repayments without the customers’ permission
• Using continuous payment authority to collect outstanding payments even where it had reason to believe that the customers concerned were in financial difficulty
• Failing to engage properly with customers experiencing repayment problems, such as refusing reasonable repayment plans suggested by customers
• Sending threatening and misleading letters, texts and emails to customers
• Giving inaccurate customer information to credit reference agencies
• Carrying out inadequate affordability assessments for guarantor loans
The FCA identified issues with the firm in August 2014, and took action at this time to stop CFO collecting outstanding debts. After the completion of an independent review in February 2016 the FCA renewed the firm’s permission to collect its existing debts, but did not re-authorise it to offer any new loans.
The firm has since entered administration, but is expected to be in a position to pay the compensation in full.
Jonathan Davidson, Director of Supervision – Retail and Authorisations at the FCA, said:
“We discovered that CFO Lending was treating its customers unfairly and we made sure that they immediately stopped their unfair practices. Since then we have worked closely with CFO Lending, and are now satisfied with their progress and the way that they have addressed their previous mistakes.
“Part of addressing these mistakes is making sure they put things right for their customers with a redress programme. CFO Lending customers do not need to take any action as the firm will contact all affected customers by March 2017.”
The amount of compensation to be paid is one of the largest redress orders for a payday lender since the FCA took over as consumer credit regulator. The sum to be paid is larger for example than the £15.4 million paid by Dollar Financial to some 147,000 customers in October 2015. The fact that CFO, as a much smaller firm, has been hit with a larger penalty illustrates just how serious their misconduct was.
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.