News Column

The Money Shop agrees to pay back £700,000

July 14, 2014

Patrick Collinson,

Payday lender The Money Shop is to hand back more than 700,000 to customers after it admitted it had broken its own rules on issuing short-term loans.

The company, formally known as Dollar but trading as The Money Shop, will repay interest and default charges to 6,247 customers. Due to a systems error they were given loans which breached Dollar's own lending critieria.

The repayments are being made voluntarily by Dollar, but were announced by the Financial Conduct Authority, which said: "We are pleased 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 also faces a crackdown on its entire lending process after it agreed with the FCA to appoint an independent and independent "skilled person" to review its lending decisions and report back to the FCA.

The FCA said: "The review, which will be paid for by Dollar, will cover its loan products and the entire customer journey from the initial affordability assessment to loan collection. It will also consider whether customers are being treated fairly and are now only being lent sums that they can afford to repay. The skilled person will also ask customers about their borrowing experiences and report these back to the FCA."

The Money Shop, which charges interest at 2,962%, is Britain's second largest payday lender after Wonga, and is estimated to account for a quarter of the British payday loan market.

The high street business, with its distinctive yellow fascias, opened 56 outlets in 2013, taking the total to 562. For the year to June 2013, its turnover grew 8.3% to 187m.

In April it was sold to private equity house Lone Star for $1.3bn (780m) just days after it issued a heavy profits warning, signalling that a series of UK regulatory crackdowns faced by The Money Shop had hurt the business.

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."

The Office of Fair Trading raised concerns about Dollar's lending decisions in February 2014 after a review of customer calls revealed some loans were being approved for amounts which Dollar's lending criteria would not normally allow.

Dollar will contact all affected customers immediately and expects to provide refunds in cash totalling 79,000, with the remainder of customers having their outstanding balance reduced. Refunds will be paid once Dollar has confirmed customers' contact and bank details.

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Source: Guardian Web

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