Payday firm to pay £34m redress for ‘unfair’ consumer treatment
The redress consists of £31.9m written-off customers’ outstanding balances and £2.9m in cash payments to customers.
CFO Lending stopped offering new payday loans to customers in May 2014 just a month after the Financial Conduct Authority (FCA) became responsible for consumer credit. The redress due relates to a period before the price cap for high-cost short-term credit was introduced on 1 January 2015.
In August 2014, following an investigation by the FCA, the firm agreed to stop contacting customers with outstanding debts while it carried out an independent review of its past business. It also agreed to carry out a redress scheme.
In February 2016 the FCA, satisfied with the results of the independent review, authorised the firm with limited permission to collect its existing debts but not to make any new loans.
CFO Lending also traded as Payday First, Flexible First, Money Resolve, Paycfo, Payday Advance and Payday Credit. Most of the firm’s customers had taken out payday loans, but some customers had guarantor loans or a combination of the two.
Jonathan Davidson, director of supervision – 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 [the firm], 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.”
A number of serious failings took place which caused detriment for many customers. Failings date back to the launch of CFO Lending in April 2009 and include:
• 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 customer.