Firm to offer redress scheme to over 92,000 customers affected by ‘unfair’ practices.
The Financial Conduct Authority (FCA) has ordered payday lender Cash Genie to set aside £20 million in a redress scheme for borrowers, after it was found to have engaged in ‘unfair’ business practices.
The now defunct firm, which offered short-term loans with an annual interest rate of 2,986%, will be contacting customers impacted by ‘serious failings’ identified by an FCA investigation conducted last year.
Cash Genie has agreed to pay £10 million in compensation and to write off £10.3 million of fees and interest for over 92,000 borrowers.
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‘Serious failings’
The FCA said Cash Genie was guilty of a number of serious failings, which date back to company’s beginnings in September 2009. These include:
- Charging fees and interest which were unfair. For example Cash Genie charged a £50 fee for transferring a borrower to its sister debt collection firm (Twyford Developments Ltd trading as Carter Forbes), even though it incurred no additional costs;
- Loans were rolled over or refinanced without borrowers’ explicit request or consent and without any checks;
- Ariste Holding Limited, the parent firm, also used banking information from its other brands (www.txtmecash.co.uk and www.paydayiseveryday.co.uk) to take payments for Cash Genie loans without consent; and
- Cash Genie failed to send annual statements to customers who had not repaid their loan after 12 months. In these cases it should not have applied any further fees or interest to accounts.
Cash Genie stopped offering new loans in September 2014 and its US parent firm EZCORP announced the following month that it would exit the UK payday lending market by 2015.
Setting things right
Cash Genie has agreed to a £20 million redress package, which will consist of a combination of cash refunds and balance write offs.
The FCA says the firm will:
- Write off or refund fees and charges which should not have been applied;
- Write off or refund rollover interest where the firm did so ‘inappropriately’;
- Refund payments taken without authorisation and write off outstanding balances impacted by this practice; and
- Write off or refund fees added to an account after the point when the firm should have provided an annual statement.
The redress scheme will apply to Cash Genie borrowers as well as some customers who applied for loans through Ariste Holding Limited’s other websites www.txtmecash.co.uk and www.paydayiseveryday.co.uk.
The FCA says borrowers do not need to take any action. Cash Genie will contact all impacted customers by 18th September 2015. But those who think they may have been affected can find more information on the FCA website.
Tackling the payday loan problem
The FCA had to step in last year after it found borrowers using payday loans were being dragged into debt because of unfair charges and practices. It introduced new rules in January 2015 to cap the amount of interest and fees they charge.
However, borrowers are still being treated poorly by these firms according to the latest statistics.
The Financial Ombudsman Service (FOS) says it has received 452 new payday loans complaints and 1,278 enquiries between April and June this year. On average the service is now investigating around 150 new cases each month.
During 2014/15 the FOS reports it received 1,157 complaints, of which over two thirds were found in favour of the borrower.
The complaints centred on loan providers being unwilling to accept a suitable repayment plan, the use of continuous payment authorities, debt chasing, poor customer services and administration, damage to credit records and payday loans being taken out fraudulently.