Payday lender to refund €88,000 to borrowers amid lending criteria review
Payday lender The Money Shop is to refund more than £700,000 to borrowers who received loans that exceeded the firm's lending criteria.
The Money Shop's owner Dollar, which is the UK's second largest payday lender, failed to ensure that proper checks took place to ensure that borrowers did not take on more than they could afford to pay back.
After the Office of Fair Trading raised concerns about Dollar's lending decisions in February, the firm has agreed to refund more than £700,000 in interest and default charges to 6,247 customers of The Money Shop.
Dollar will contact all affected customers and expects to provide refunds totalling £79,000, with the remainder of borrowers having their outstanding balance reduced. The company has blamed a systems error for the mistakes, which cover a period between January 2013 and April this year.
In April, the Financial Conduct Authority took over responsibility for the regulation of 50,000 consumer credit firms, including payday lenders.
Clive Adamson, director of supervision at the FCA, 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.
"We are pleased that Dollar is working with us to put matters right for its customers and to ensure that these practices are a thing of the past."
Dollar has an estimated 24% share of the payday market and also operates under the names of Payday UK, Payday Express and Ladder Loans.
The company has agreed to appoint an independent person to review its lending decisions and consider whether customers are being treated fairly and being lent sums that they can afford to repay. The person will also ask customers about their borrowing experiences and report back to the FCA.
The industry is currently undergoing a competition investigation, the full results of which will be published later this year.
The Competition and Markets Authority suggested in its provisional findings that an independent price comparison website should be set up to help people compare overall payday loan costs more easily, after finding that customers are typically paying £60 a year over the odds for such loans.