Company behind The Money Shop to repay £15.4 million to customers
The company behind high street lender The Money Shop has agreed to repay more than £15.4 million to customers after the financial watchdog highlighted a string of failures.
The Financial Conduct Authority (FCA) said 147,000 customers may have suffered detriment as a result of the lender's affordability checks, debt collection practices and systems errors.
Dollar Financial UK, which trades as The Money Shop, Payday UK and Payday Express, lent cash to many customers who could not afford the repayments, the FCA added.
It will now refund 65,000 customers, reduce the loan balance of 67,000 others and offer both a refund and loan reduction to a further 15,000.
Affected customers do not need to do anything as the lender will be tasked with contacting them and completing the redress by early 2016.
The firm has also pledged to make a number of changes to its lending criteria in order to meet the FCA's requirements for high-cost short-term lenders
Jonathan Davidson of the FCA said: "The FCA expects all credit providers to carry out proper checks to ensure that borrowers don't take on more than they can afford to pay back. We are encouraged that Dollar is committed to putting things right for its customers."
Responding to the announcement, Dollar chief executive Stuart Howard said he accepted the findings of the review and apologised to anyone who may have suffered difficulties as a result.
He said: "It is proper that we put things right where they have gone wrong and I have gone further than the review in reforming the way our business operates to reflect the company aim of being the most responsible lender in its market place."
It marks the latest in a series of clampdowns on the payday loan industry.
Last October, Wonga was forced to write off £220 million worth of customer debt, while Cash Genie was slapped with a £20 million compensation bill this summer.
MoneySavingExpert.com managing editor Guy Anker said he expects more lenders to be censured in the future.
"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 was the next big one, now it's Dollar, and we very much doubt it will be the last," he said.
"The payday lending industry lived in a void of regulation for far too long. Thankfully, we have started to see much greater scrutiny of the ways these businesses in this dangerous industry operate."