The Money Shop to refund 6,000 payday loan customers
- Published
More than 6,000 payday loan customers are to receive refunds after errors made by the UK's biggest High Street operator, the Money Shop.
The Financial Conduct Authority (FCA) said, external the company had agreed voluntarily to repay some £700,000 in charges.
The customers were allowed to borrow more than the maximum possible under the company's own lending criteria.
The Money Shop said the mistakes - put down to a systems error - were now being put right.
"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," said Clive Adamson, the FCA's director of supervision.
The 6,247 customers affected will receive refunds averaging more than £100 each, to cover unnecessary interest and default charges.
The Money Shop said the amounts over-lent were only about £12 each on average, but nevertheless, the charges would be refunded.
"Mistakes do happen and, when they do, we can be trusted to put them right, as we have in this instance," said Sanjiv Corepal, Money Shop's managing director.
Cap on credit
News of the refund was welcomed by consumer groups.
The StepChange Debt Charity said it was further evidence that payday lenders had failed to act in the interests of borrowers.
"Despite the payday lending industry's repeated assurances that it was lending responsibly and that poor practice was a thing of the past, we have continued to see thousands of cases where people have been trapped in unsustainable and unaffordable cycles of high-cost borrowing," said Peter Tutton, the head of policy at StepChange.
The Money Shop's owner, Dollar, has also agreed to improve the way it assesses customers, to see if they can afford to repay loans.
It will appoint an independent person to scrutinise the company's lending policies.
That person will also talk to customers about their borrowing experiences and report back to the FCA.
Dollar, which also owns Payday UK, Payday Express and Ladder Loans, has 24% of the payday market.
The FCA is expected to announce a cap on the cost of credit for the payday industry later this week.