Business

Payday firm CFO Lending forced to repay £35m to borrowers

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A payday lending business has been forced to repay £35m to its borrowers for a catalogue of wrongdoings.

The company took money from its customers' bank accounts without permission, charged them more than they owed, and sent them threatening letters.

The Financial Conduct Authority (FCA) described the firm's "serious failings" as "unfair behaviour".

CFO Lending will have to pay an average of about £360 each to 97,000 customers.

Jonathan Davidson of the FCA said CFO's borrowers, who were mainly people in need of short-term loans, did not need to do anything now as the firm had agreed to contact all its customers by March next year.

"We discovered that CFO Lending was treating its customers unfairly and we made sure that they immediately stopped their unfair practices," said Mr Davidson.

"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."

The repayments will consist of £31.9m of debts being written off, and cash refunds of £2.9m.

Shrinking industry

CFO Lending was banned by the FCA earlier this year from making any new loans and now can only collect outstanding debts.

Labour MP Stella Creasy, who has specialised in campaigning against payday lenders, said this case was the "tip of the iceberg" and that the FCA should tackle other similar lenders relentlessly.

"'It is vital that pressure continues to bear down on this industry to help challenge the mistreatment of customers," she said.

"For too long they have been squeezing millions of people who have been caught up in the spiral of debt payday loans create."

CFO Lending started in business in 2009, traded under a number of brand names such as Payday First, Flexible First, Money Resolve, Paycfo, Payday Advance and Payday Credit.

It is one of numerous smaller payday lending firms that have effectively been driven out of business by new rules, which have restricted the amount of interest they can charge, and by a regulatory crackdown on companies' bad behaviour towards borrowers.

Mike O'Connor, chief executive of the StepChange debt charity, said: "The regulations on payday loans are making a difference and the amount of people we see with payday loans has been falling."

Two years ago the most high-profile firm in the payday lending business, Wonga, was forced to write off £220m of debts for 330,000 customers, and told to pay £2.6m in compensation to 45,000 customers after sending out fake letters from non-existent law firms.

It was also told to compensate 200,000 customers who it overcharged.

Since then Wonga has recorded two years of losses, which doubled to £80m for 2015, as new management was forced to restrict its lending as part of an attempt to revamp the business.

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