The Money Shop to refund thousands of payday loan customers
Over six thousand are due a slice of compensation after errors made by the payday lender.
The Money Shop has agreed to repay £700,000 in charges to thousands of customers after it admitted to making lending errors.
The payday loan provider said a system fault allowed some people to borrow more than the maximum possible under its own lending criteria.
Over six thousand customers were lent more than they should have been between January 2013 and April 2014.
Following a review by financial regulator, the Financial Conduct Authority (FCA), the payday lender has voluntarily agreed to reimburse interest and default charges to those impacted by its mistake.
Over-lending
The FCA said it expected all credit providers to carry out proper checks to ensure borrowers don’t take on more than they can afford to pay back.
The Money Shop over lent to borrowers by small amounts of about £12 each time.
Sanjiv Corepal, managing director of The Money Shop said: "Mistakes do happen and, when they do, we can be trusted to put them right, as we have in this instance.”
The system fault is now fixed.
However, The Money Shop’s parent company Dollar has also agreed to appoint an independent ‘skilled person’ to review future lending decisions and report back to the FCA.
Dollar, which also trades as Payday UK, Payday Express and Ladder Loans, has a 24% share of the payday loan market.
Compensation
Part of the £700,000 set aside by The Money Shop for compensation will be paid in cash.
This is expected to total £79,000 and will be paid once up-to-date contact and bank details are confirmed.
The remaining pot will be applied to reduce existing balances.
On average the 6,247 customers affected will received refunds averaging around £100 each.
FCA crackdown
The FCA took over the regulation of the consumer credit sector in April this year and promptly launched a thematic review of the payday loan industry.
Last month it ordered Wonga to pay compensation of more than £2.6 million for ‘unfair and misleading’ debt collection practices, after it was found to have sent letter to borrowers posing as law firms.
Today it has announced a cap on the cost of credit for the payday loan industry, which could help prevent people falling into a debt spiral.
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