The UK is clamping down on Dollar Financial, the owner of The Money Shop, Payday United Kingdom, Payday Express and Ladder Loans, and is forcing it to pay close to £15.4 million back to its customers.
Mistakes, debt collection practices, and affordability have forced the Berwyn based company to agree to provide compensation to customers who took out loans from these companies between April 1, 2014 and April 30, 2015 based on affordability as well as collection issues that occurred between January 1, 2013 and April 30, 2015.
While the amount agreed upon is not insignificant, it is still dwarfed by the hit suffered by the company’s rival Wonga in October last year. It was forced to write off a stunning £220 million of debt to around 330,000 of its customers after they confessed to giving loans to individuals they knew could not afford them.
Based in part on research conducted by The Skilled Person, a firm hired by UK regulators for detailed analysis of companies whose activities cause concern, Dollar Financial will pay out a full cash refund to 65,000 of its customers. Another 67,000 will see a reduction in their loan repayments, while the final 15,000 customers covered in the ruling, will receive a refund and a reduction in their repayments.
The series of failings at lender Dollar Financial UK was highlighted by the Financial Conduct Authority, which stated that it “caused detriment for many of its customers”. The investigation into the company, which started in July last year, discovered that a significant number of customers were given loans above their ability to repay them.
Dollar Financial will also have to alter its loan issue procedures to bring them in line with the FCA criteria for high-cost short-term lenders. As a result, the Money Shop has reduced its lending rates to a “representative” 743 percent, but Payday United Kingdom is still going to charge its usual 1,192 percent short term loan rate.
Guy Anker, MoneySavingExpert.com’s Managing Editor, stated that he expects “more lenders to be censured in the future”.
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