More than 92,000 customers of payday loan firm, Cash Genie, are due a share of £10m in redress after the firm was found guilty of making a number of "serious failings", including charging unfair fees and rolling customers' loans over without consent.
As a result of its poor practice, Ariste Holding Limited, which traded as Cash Genie, has agreed alongside regulator the Financial Conduct Authority (FCA) to provide £10 million in redress.
It had already voluntarily written off £10.3m of fees and interest before the FCA to took over regulation of the consumer credit market in April 2014.
We explain what's happening below. For a full Q&A, also see the Cash Genie website.
What has Cash Genie done wrong?
The FCA found Cash Genie guilty of the following failings, which date back to when it launched in September 2009. The FCA says the issues were resolved in early 2014.
- It charged unfair fees and interest. It charged £50 to transfer customers to its sister debt collection firm, Twyford Developments Ltd, trading as Carter Forbes, even though it incurred no additional costs to do this. In other cases, it charged fees which it wasn't entitled to under Cash Genie's consumer contracts. For example, it charged excessive fees for late payments, sending letters, and for tracing customers who'd moved or changed their details.
- It wrongly rolled over loans. Loans were rolled over or refinanced without customers' explicit request or consent and without undertaking appropriate checks or assessments of the customers' situations.
- It failed to send annual statements to customers who hadn't repaid loans after 12 months. This means it shouldn't have applied further fees or interest to their accounts after the initial 12 months.
- It misused customers' bank details. Ariste Holding Ltd also traded under the brands txtmecash.co.uk and paydayiseveryday.co.uk. But a number of Cash Genie customers were encouraged to apply to these websites for loans and give their banking details under the false pretence that the loan had been pre-approved. This banking information was then used to take payment for existing Cash Genie loans without customers' informed consent.
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'Most people should never use payday loans'
Martin Lewis, founder and editor of MoneySavingExpert.com, says: "We knew when Wonga had its wrists slapped twice last year after its horrendous practices that it was just the tip of the iceberg. Cash Genie is the next big one and I very much doubt it will be the last.
"The payday lending industry has been a parasite on this country, it lived in a lacuna of regulation for far too long. Thankfully, we have started to see much greater scrutiny of the ways these dangerous businesses in this dangerous industry operate. And now their horrible practices are starting to catch up with them.
"No one out there should think that because we have regulation, payday loans are now safer. Most people simply should never use them, they are not a rescue operation. This is an industry that was created by marketing rather than to meet a demand.
"It's worth asking yourself, if you are borrowing money to pay back in a month, what is going to be different in your circumstances that means you will be able to afford to pay it back then when you don't have the cash now?
"For many people the answer is nothing, in which case it's not a rescue for someone who is financially drowning, it's splashing water over their head." See our Payday Loan Alternatives guide for help if you're struggling.
I think I'm affected. What should I do?
Cash Genie says it will contact all affected customers by email, by 18 September 2015. If it doesn't hold a current email address, it will contact customers by post. If it can't contact you by either of these methods, it says it will contact you by telephone.
However, if you have changed your email address, home address or telephone number since your last contact with Cash Genie, let it know. You can do this through its Members Area, by phone on 0333 366 0023 or by emailing: email@example.com.
If you think you're affected and don't hear from Cash Genie by 18 September 2015, contact it on 0333 366 0023.
How much redress am I due?
Redress for each of the four issues will be paid as followed:
- Unfair fees and interest charges. Cash Genie will write-off or refund fees and charges, which should not have been added to customer accounts:
- Any excess charges applied over: one late payment fee of £15, four letter fees at £12 per letter, or one trace fee at £45.
- Any interest in excess of 30% of the outstanding balance charged per month.
- The £50 fee for transferring a customer's account to its sister debt collection firm.
- The £30 fee charged when a customer applied for a chargeback through their bank where they believed that Cash Genie had taken an unauthorised payment from their account.
- All charges on customer accounts which cannot be specifically identified and justified.
- Rolling over loans. For loan agreements dated from 1 January 2013, when new regulation came in, to 30 June 2014, the firm will write-off or refund any interest charged over the initial first month's interest payment, plus a further three months' interest, whether this was added as rollover interest or as part of a paydown or a repayment plan. Many lenders voluntarily agreed to limiting the number of times a loan can be rolled over to three from January 2013. Prior to this loans could be rolled over unlimited times. From July 2014, new FCA rules came into force limiting the number of rollovers per loan to two.
- Failing to provide annual statements. Cash Genie will write off or refund interest and charges added to customers' accounts after the point at which it should have provided customers with an annual statement.
- Misusing customers' bank details. Cash Genie will refund amounts taken without authorisation and will write-off all outstanding balances on accounts affected by this practice.
In addition, those affected by the unfair fees, rollovers and annual statement issues who've since closed their account, will also receive simple interest based on the consumer prices index (CPI) rate of inflation during the time period they were affected.
How will redress be paid?
Cash Genie say redress will be paid either as a reduction or wiping of your outstanding loan, or in cash if you've since paid off your loan. If you're due more redress than your outstanding loan, you'll have the loan wiped and received the rest of the redress in cash.
Cash Genie adds that it will contact you and ask if you'd prefer your payment to be made to a different bank account to the one it has on file for you, or if you would rather receive a cheque.
I have an outstanding loan. Do I need to continue paying it?
Yes. You need to continue repaying any outstanding balance on your account. However, no further fees or interest will be added for those affected by this review.
Is Cash Genie still offering new loans?
The FCA says Cash Genie stopped selling new loans in the UK in September 2014, with txtmecash.co.uk and paydayiseveryday.co.uk also stopping the sale of new loans about the same time.