The payday lender scandal continues. The latest high-cost credit company to be fined is Dollar Financial, which has been forced to refund more than £15.4m to 147,000 customers.
After an investigation into the firm, the City Watchdog ruled that Between April 2014 and April 2015 - after tough new lending rules came in - Dollar customers “may have suffered detriment as a result of the firm’s affordability checks, debt collection practices and systems errors”.
In short many were lent more than they could afford to repay. The company – which owns the high street chain The Money Shop, plus online loan firms Payday UK, Payday Express and Ladder Loans – has now had to change its lending criteria to meet the Financial Conduct Authority’s rules for high cost short term lenders.
Jonathan Davidson, director of supervision at the regulator said: “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.”
Wonga and Cash Genie have also been forced to pay back cash to badly treated customers in the last year and there is likely to be more action, said Mike O’Connor, chief executive of StepChange Debt Charity. “While the number of people coming to us with payday loan debt problems is falling, we continue to see problems with unaffordable lending and people struggling with multiple loans.
“We need better forms of credit to help people when they need it, better precautionary savings measures to help households build financial resilience and better protections for people when they fall into difficulty.”
Carl Packman, author of a book on payday lending, said: "The news confirms what many critics have known about the payday loans business for some time: that in order for payday lending to grow in the way it did over the recession years it needed to rip off people struggling with their finances.”
If you’re owed money, you shouldn’t need to do anything to get your cash back. Dollar will start contacting customers immediately and plans to hand over all repayments by early 2016, including tracking down people who have changed their more information on The Money Shop, Payday UK, Payday Express and Ladder Loans websites.
The exact amount of redress each customer will get will be assessed on a case by case basis. Some 65,000 customers will receive a cash refund while 67,000 will have their current loan balance reduced. Meanwhile 15,000 customers will receive a cash refund and a reduction in their loan balance.
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