Payday firm CFO Lending to pay £34 million redress

19th September 2016

Payday firm, CFO Lending, has entered into an agreement with the Financial Conduct Authority (FCA) to provide over £34 million of redress to more than 97,000 customers for unfair practices. The redress consists of £31.9 million written-off customers’ outstanding balances and £2.9 million in cash payments to customers.  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. 
  • 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 trading names include Payday First, Flexible First, Money Resolve, Paycfo, Payday Advance and Payday Credit. Most of the firm’s customers had high-cost short-term credit loans (payday loans) but some customers had guarantor loans and some had both.

Jonathan Davidson, Director of Supervision – Retail and Authorisations at the Financial Conduct Authority, 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 CFO Lending, 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.”

In response to the announcement Mike O’Connor, Chief Executive of StepChange Debt Charity, said: “This case highlights the importance of a strong regulator prepared to step in and take decisive action against firms that break the rules. We need a powerful FCA to defend consumer interests and look out for vulnerable consumers and it is good to see this in action.

“The regulations on payday loans are making a difference and the amount of people we see with payday loans has been falling, but there is more work to do across all forms of consumer credit to ensure that everyone is protected from the damage that poor practice and harmful products can cause.”

Gillian Guy, Chief Executive of Citizens Advice said: “Irresponsible payday lending wreaks havoc on people’s finances. We welcome the FCA’s action to crackdown on CFO Lending’s unacceptable failings which have hit thousands of customers. Since taking over regulation, the FCA has cleaned up the payday loan market significantly with measures such as a cap on interest rates and fees.

“However, our recent evidence shows a quarter of borrowers say they were not, or could not remember being asked basic questions about their ability to pay back their payday loan. We want the FCA to tighten up its responsible lending guidance even further – forcing every single payday lender to carry out rigorous financial checks on potential borrowers.”