Payday loan company CFO Lending has agreed to pay more than £34 million of redress to 97,000 customers after it was found to have acted unfairly, the Financial Conduct Authority (FCA) has confirmed.
Of the £34 million, £31.9 million will be dedicated to writing off existing customers' balances and the remaining £2.9 million will be cash refunds - that works out at an average payment of £350 per customer, but amounts will vary. Most of CFO Lending's customers had payday loans, but some had guarantor loans or both.
The FCA first looked at CFO Lending's practices in 2014 when the payday loans company agreed to suspend collecting customers' outstanding debts while it investigated past practices. CFO Lending stopped offering new payday loans to customers in May 2014 but the FCA authorised the firm to collect existing debts.
CFO Lending also traded as Payday First, Flexible First, Money Resolve, Paycfo, Payday Advance and Payday Credit. The redress scheme applies to some customers who applied for a loan with CFO Lending under these trading names too.
Find out more about how payday loans work and what to watch out for in our Payday Loans guide.
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What went wrong?
CFO Lending launched in 2009 and the FCA has said that the failings date back as far as then and up until 1 January 2015, when the price cap for payday loans and other short-term credit was introduced.
The FCA found that CFO Lending had treated its customers unfairly, the unfair practices included:
- The firm’s systems not showing the correct loan balances for customers, so that some customers ended up repaying more money than they owed
- Misusing customers’ banking information to take payments without permission
- Making excessive use of continuous payment authorities (CPAs) to collect outstanding balances from customers. In many cases, the firm did so where it had reason to believe or suspect that the customer was in financial difficulty
- Failing to treat customers in financial difficulties with due forbearance, including refusing reasonable repayment plans suggested by customers and their advisers
- Sending threatening and misleading letters, texts and emails to customers
- Routinely reporting inaccurate information about customers to credit reference agencies
- Failing to assess the affordability of guarantor loans for customers
What do I need to do if I'm affected?
You don't need to do anything for now, as CFO Lending has said it will contact any customers that are due redress by March 2017.
If you think you're entitled to redress and don't hear anything by March 2017 then you can contact CFO Lending on 0203 583 6303.
If you owe CFO Lending money then the FCA has advised that you should continue to make payments, unless CFO Lending says otherwise. The FCA has also advised that any customers who are struggling to make repayments should contact CFO Lending to discuss payment options.
'These things can be hugely financially dangerous – don’t trust these companies'
MoneySavingExpert.com founder Martin Lewis says: “This is yet further evidence of how the payday loans industry simply reaped vulnerable people for every penny - thankfully they are finally seeing payback for it.
“When I look back at the period when this was going on, we were warning politicians and telling them we needed stronger regulation, we needed better protection - but laissez-faire attitudes of the government at the time meant that many people weren’t protected. While giving them money back now does help them to an extent, it is not the same as having protected them in the first place. Thankfully the payday loan industry now has a fraction of the power and reach of what it once did.
“These things can be hugely financially dangerous – don’t trust these companies. It’s also 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.”
What did the FCA say?
Jonathan Davidson, director of supervision for retail and authorisations at the FCA, said: “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.
“Part of addressing these mistakes is making sure they put things right for their customers with a redress programme. CFO Lending customers do not need to take any action as the firm will contact all affected customers by March 2017.”