LONDON, Sept 19 (Reuters) - CFO Lending will provide 34.8 million pounds ($45 million) in compensation to 97,000 clients after the Financial Conduct Authority discovered the British payday lender was treating them unfairly, the watchdog said on Monday.
The Financial Conduct Authority (FCA) has agreed a number of redress schemes with payday lenders since 2014 as it cracks down on a sector under fire from lawmakers and the Church of England alike for piling pressure on the poor with high interest rates.
The watchdog said the compensation being paid by CFO Lending, which was ordered in February to stop offering new loans, was the result of “serious failings” dating back to its launch in 2009.
“We discovered that CFO lending was treating its customers unfairly and we made sure that they immediately stopped their unfair practices,” the FCA’s director of supervision for retail firms, Jonathan Davidson, said in a statement.
“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,” Davidson said.
CFO Lending declined to comment.
The watchdog said CFO’s systems showed incorrect loan balances so some customers repaid more than they owed and that it sent “threatening and misleading” letters, text messages and emails to customers while routinely giving inaccurate information about clients to credit reference agencies.
CFO’s redress consists of 31.9 million pounds written off outstanding balances with customers and 2.9 million pounds in cash payments to them. The scheme covers the period before a cap on rates charged by payday lenders was imposed in January 2015.
A number of lenders have agreed with the FCA to compensate customers. In October, payday lender Dollar agreed to give 15.4 million pounds in redress to more than 147,000 customers. Cash Genie also agreed last year to provide more than 20 million pounds in compensation to over 92,000 customers.
In 2014, Britain’s biggest payday lender, Wonga, agreed to pay compensation of more than 2.6 million pounds to 45,000 customers while the Money Shop also agreed to refund over 700,000 pounds to 6,247 customers.
$1 = 0.7660 pounds Reporting by Huw Jones; editing by David Clarke