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Britain’s financial watchdog has forced a payday lender to issue more than Â£ 34million in compensation to 91,000 customers over ‘unfair practices’.
The Financial conduct authority said CFO Lending, a UK company that operated under various aliases including Payday First and Flexible First, had “a number of serious breaches” which “have caused harm to many customers”.
The heavy watchdog repair package is the latest in a string of tough payday lenders that have bankrupted many people. The FCA last year put a cap on how much short-term credit providers can charge, which it says would wipe out almost all payday lenders.
Wonga, once the UK’s largest payday lender, reported its first annual loss in 2015 after reshaping its business to comply with watchdog rules and diversify its strategy to survive in a tougher market.
The FCA said Monday that CFO Lending neglected to have conversations about affordability before signing borrowers for ongoing monthly repayments, as well as sending threat letters, the FCA said.
The Leytonstone, east London-based company will pay Â£ 31.9million to write off outstanding customer balances and Â£ 2.9million in repayments, the FCA said. She has already stopped making new loans. CFO Lending did not return a request for comment.
The FCA began regulating payday lenders in 2014, after a rapid expansion of the sector was accompanied by a significant increase the number of people facing serious debt problems as a result of borrowing at high interest rates.
Two years ago, Wonga canceled Â£ 220million in debts for 330,000 customers following talks with regulators.
The FCA has since imposed tough new rules on the industry, including fee caps and a limit on the number of loan repossessions, after some payday lenders were found to impose annual percentage rates of more than 5,000 for hundred.
More than 1,400 companies have left the industry since the regulatory crackdown began, as consumer complaints have exploded.
However, a separate home loan industry, which provides home loans to people who cannot access traditional banks, continues to thrive and is trying to move its business online.
âPayday loan regulations are making a difference and the number of people we see with payday loans has gone down,â said Mike O’Connor, CEO of the Step Change charity. “But there is more work to be done in all forms of consumer credit to ensure that everyone is protected from the damage that bad practices and harmful products can cause.”
The FCA found that CFO Lending made excessive use of ongoing monthly payments for borrowers who were likely in financial difficulty. The company also refused “reasonable repayment plans suggested by customers and their advisers,” the regulator said.
Additionally, the regulator said, CFO Lending has failed to assess the affordability of lending from guarantors and has been found to “routinely report inaccurate customer information to credit reference agencies.”
“We found that CFO Pret was treating its clients unfairly and we made sure that they immediately put an end to their unfair practices,” said Jonathan Davidson, director of oversight – retail and licensing at FCA.
âSince then, we have worked closely with CFO Lending, and we are now happy with their progress and how they corrected their previous mistakes. ”
CFO Lending has also been traded under the names Payday First, Flexible First, Money Resolve, Paycfo, Payday Advance and Payday Credit.
Additional reporting by Emma Dunkley