A payday lender firm is set to lose £1.7m in compensation payouts to over 4,000 customers after concerns were raised about affordability checks.
CashEuroNet organisation that runs Quick Quid and Pounds to Pocket have been working alongside Financial Conduct Authority (FCA) for over a year to investigate into the way they assess customers and how much they can borrow, after some customers were left facing financial distress.
CashEuroNet has reassessed all loans since April 2014 that resulted in debt after thirty days, and discovered that more than 3,000 customers were lent too much.
It is expected that 2,500 borrowers will have their current loan balance removed, whilst 1,000 customers will be repaid interest and almost 500 will receive their outstanding arrears erased and refunded.
Director of supervision for retail and authorisations at FCA, Jonathan Davidson said: “We are pleased that CashEuroNet is working with us to address our concerns,
“It is important that firms carry out appropriate affordability checks and pay particular attention to fair treatment of those who have trouble meeting their loan repayments.”
Quick Quid and Pounds to Pocket have said on their websites that they will be sending letters to all affected customers and intend to put them onto the position they would have been under new affordability checks.
As part of the agreement set between the lender and the credit referencing agency, customers will also have the effect of the loan on their credit records removed.
FCA have been investigating the short term loan industry since taking over responsibility of consumer lenders since April 2014.
Another short-term loan lender, Cash Genie, was told early July that to pay out or write off £30m of all 92,000 customers after FCA investigated into the way the firm handled debt collection and rollover loans.
FCA are currently still investigating all consumer credit applications made since 2014, with short-term lenders.