Almost 4,000 borrowers are due a share of £1.7 million after CashEuroNet UK LLC, trading as QuickQuid and Pounds to Pocket, lent some customers more than they could afford to repay.
The Financial Conduct Authority (FCA) says the lender reassessed all loans granted since 1 April 2014 – when the FCA took over regulation of the industry and introduced new rules – which were in arrears for 30 days or more.
As a result, 3,940 customers were found to have been lent sums in excess of what they could afford to repay – the vast majority of these loans were granted between April and August 2014 while the company was introducing tighter lending criteria.
'The payday lending industry has been a parasite on this country'
Guy Anker, managing editor at MoneySavingExpert.com, says: "Many of the horrible practices of payday loan firms that trap the vulnerable into debt are finally coming home to roost. Wonga's had its wrists slapped, Cash Genie and Dollar have been punished, now it's the turn of QuickQuid and Pounds to Pocket.
"The payday lending industry has been a parasite on this country, it lived in a void 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.
"No one should think 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."
I think I'm affected. What should I do?
Both the regulator and CashEuroNet say affected customers don't need to do anything. CashEuroNet says affected customers will be notified within two days by email, and if that doesn't reach them, they'll be sent a letter in the post.
If you're concerned or have any questions, visit QuickQuid's and Pounds to Pockets' contact pages for information on how to get in touch. The firms also have Q&A's on their websites about today's news.
How much redress am I due?
Affected customers will be refunded the interest on the unaffordable portion of their loans going back to when they were first taken out. The refund payments will also include 8% annual interest (prorated). The FCA says this means:
- 2,523 customers will have their current loan balances written off.
- 961 customers will be paid cash refunds of interest paid on the unaffordable element of their loans.
- 456 customers will receive both cash refunds and have their current loan balances written off.
How will redress be paid?
CashEuroNet says it has already deposited this refund into the bank accounts of those whose account details it has on file.
If the lender doesn't have your bank account details, it says it will send you a cheque via post in the next 4-8 weeks.
I have an outstanding loan. Do I need to continue paying it?
We're awaiting confirmation from CashEuroNet on this, but it's best to continue paying any outstanding loans as normal, just in case.
Are QuickQuid and Pounds to Pocket still selling loans?
Both firms are still operating as normal.
What does CashEuroNet say?
Nick Drew, UK managing director of CashEuroNet, says: "We appreciate the opportunity to work with the FCA and the Skilled Person to review our processes, and we are pleased they've witnessed how seriously we take our regulatory responsibilities and our constant desire to achieve good outcomes for our customers.
"We apologise to the 4,000 affected customers, and we are pleased to be able to address this with the announced redress plan."