The Financial Conduct Authority has completed an investigation into payday loan umbrella company CFO Lending and has ordered them to repay almost £35 million to borrowers due to a series of ‘serious failures’.
The action taken against CFO Lending is the latest development in a longstanding campaign against malpractice in the payday loan sector. The campaign has seen major provider Wonga forced to repay £2.6 million in compensation, and to write off a further £220 million worth of debt. Wonga has since undergone a fairly drastic restructuring process after two consecutive years posting net losses.
CFO, who traded as several different subsidiary lending companies, were found to be guilty of “a number of serious failings…which caused detriment for many customers” which dated back to the company’s launch in 2009.
Failures included harassing customers with threatening letters, overcharging customers, and taking customers’ money directly from their bank accounts without permission.
The £35 million compensation consists mainly of debts that CFO are being forced to write off, with a total value of £31.9 million.
The FCA had already barred CFO from offering any new loans earlier in 2016, before reaching the final judgement regarding the redress due to affected customers.
The FCA’s Jonathan Davidson explained: “We discovered that CFO Lending was treating its customers unfairly and we made sure that they immediately stopped their unfair practices.
“Since then we have worked closely with CFO Lending, and are now satisfied with their progress and the way that they have addressed their previous mistakes.”
The FCA explained to potentially affected customers that, if they are due money back, they will be contacted by CFO directly and will not have to apply for any compensation. They also made it clear that, unless they are expressly told not to, customers who owe CFO money should continue to make payments and if they are having difficulty doing so, they should get in touch with the lender.
Stella Creasy MP, who has been a vocal member of the campaign against payday lenders, praised the FCA’s decision to order CFO to compensate customers, and implored them to extend the same approach to the rest of the sector.
“‘It is vital,” she said, “that pressure continues to bear down on this industry to help challenge the mistreatment of customers.
“For too long they have been squeezing millions of people who have been caught up in the spiral of debt payday loans create.”