Payday lender Cash Genie has agreed to put aside 20 million pounds ($31 million) to compensate more than 92,000 customers for unfair practices, Britain’s Financial Conduct Authority said on Monday.
The watchdog said Cash Genie, part of Ariste Holding Limited, had agreed to provide 10 million pounds in redress after having voluntarily written off 10.3 million pounds of fees and interest.
“We have been encouraged that Cash Genie has been working with us proactively and openly to put things right for its customers after these issues were reported,” FCA acting director of retail supervision, Linda Woodall, said in a statement.
Payday lenders, which provide short-term loans to tide people over until pay day, have come under scrutiny for charging borrowers sky-high interest rates and exorbitant fees.
The watchdog has cracked down on way the lenders were regulated and introduced new rules this year to cap interest rates and fees on new payday loans.
Wonga, Britain’s biggest payday lender, is trying to overhaul its business after running into trouble with the regulator over its interest rates and other practices.
Cash Genie had told the FCA voluntarily it had engaged in unfair practices and agreed a year ago to an independent review.
The regulator said the company charged interest and fees which were unfair, such as charging 50 pounds to transfer customers to a sister debt collection firm when no additional costs were incurred.
It also charged fees which it was not entitled to under its own customer contracts. Loans were also rolled over or refinanced without checking with the customer first.
“Although standards in the consumer credit sector are improving, it is disappointing that examples of poor practice in the payday market keep surfacing,” Woodall said.
The regulator, under Chief Executive Martin Wheatley, has got tough on the financial services industry since the financial crisis, imposing millions of pounds in fines on firms for misconduct.
But Wheatley is to leave his job in September after Britain’s finance ministry did not extend his contract which was due to expire next March.
This has prompted questions in the industry whether the watchdog is now seen by the government as too hard line.
A finance ministry spokesman on Monday highlighted the action against Cash Genie as an example of the regulator’s efforts to protect consumers.
“That is why we created a tough regulator, the Financial Conduct Authority (FCA), and gave it strong powers to take action wherever its rules are breached … That action announced today is exactly whey we created the FCA,” the spokesman said in a statement.
The watchdog said customers do not need to take any action as Cash Genie will contact them by Sept. 18.
Cash Genie said on its website it was undertaking a redress programme and stopped all lending in Sept. 2014.