Payday lenders to refund £1.7 million
Following an investigation from the Financial Conduct Authority, the parent company of payday loan providers Pounds to Pocket and Quick Quid has agreed to refund customers a total of £1.7 million.
The FCA 's investigation showed that both Quick Quid and Pounds to Pocket had been lending money to several customers who could not afford to repay their loans. Around 4,000 customers were affected and are due to be returned, on average, £425 each.
CashEuroNet is the parent company for both of the aforementioned lenders and was called upon by the FCA to pay back the sums owed following an extensive investigation. This all comes not long after a similar investigation into another company, Dollar Financial, who own The Money Shop. The pay-out required from Dollar Financial was significantly larger than that that CashEuroNet had to provide. They had to pay out a total of £15 million to a staggering 147,000 affected customers.
The battle against unscrupulous payday lenders is raging on, with the FCA forcing lenders to change their criteria by which they judge customers as eligible to borrow, given the vast numbers of people who have been mis-sold loans and ended up in dire financial straits as a result.
Jonathan Davidson, of the FCA, said: "It is important that firms carry out appropriate affordability checks, and pay particular attention to fair treatment of those who have trouble meeting their loan repayments."
However, while problematic payday lenders are being clamped down on, the FCA have recently expressed concern about the rising amount of problematic debt associated with the increased use of credit cards that has followed.
Since the push began against payday lenders, more and more customers have been turning to credit cards instead in order to get cash quickly. Last year, credit card demand went up to the highest level it 's been since pre-crash 2007, causing some analysts to worry about another potential credit bubble on the way.
While, the FCA has said, the credit card market (and the competition within it) is "working well," there is a worry about the sheer amount of people that are hovering just over default level. This has caused many experts to point to a potential tightening in affordability checks for credit cards ñ something like what we 've seen in the mortgage market in recent months.
One such expert is James Daley, who founded Fairer finance, a consumer group. He said: "Some lenders are not adhering to the spirit of the law and are a bit too free handing out credit without ensuring customers can afford it. The credit card market could end up down the same road as the mortgage sector, with more prescriptive rules."
Debt charity StepChange released a study recently showing the financial impact that problematic debt is having on the UK economy, pointing to costs associated with mental health treatment and unemployment, among other things.
StepChange 's chief executive Mike O 'Connor said on the subject of worrying levels of credit card debt: "Action is required on how credit card companies ahre data and carry out affordability checks to ensure people do not take on credit that looks cheap but will ultimately become unmanageable."