The FCA has recently announced that it has reached an agreement with Dollar Financial UK (Dollar), to refund over £15.4 million to 147,000 customers. Dollar (which trades as The Money Shop, Payday UK, Payday Express and Ladder Loans) will be refunding customers who may have suffered detriment as a result of the firm's affordability checks, debt collection practices and systems errors.
Soon after the FCA took over regulation of consumer credit in July 2014, it reached an agreement whereby Dollar agreed to review its lending practices and refund its customers £700,000. At that time, the FCA also appointed a Skilled Person to review Dollar's lending decisions, including whether customers were being treated fairly and were only lent sums that they could afford to repay. The review revealed that many customers were lent more than they could afford to repay. The firm has since agreed to make a number of changes to its lending criteria in order to meet the FCA's requirements for high-cost short-term lenders (more commonly referred to as 'payday lenders').
Dollar Financial UK has agreed to provide redress to those customers who were affected. The redress relates to loans taken out between 1 April 2014 and 30 April 2015 in respect of affordability issues, and 1 January 2013 and 30 April 2015 in relation to collection issues. The agreed package will consist of a combination of cash refunds and balance write downs.
The action taken by the FCA against Dollar in July 2014 was part of wider efforts by the FCA to tackle perceived failings in the payday lending sector. The FCA is still concerned about this segment of the market, but in the press release the FCA made points of application to the wider lending market. In particular Jonathan Davidson, Director of Supervision - Retail and Authorisations at 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."
In other words, the FCA sees assessment of affordability as key for all lending firms, and not just those in the payday lending sector.