A PAYDAY loans firm will pay £34 million back to thousands of customers after a financial watchdog found it guilty of unfair practices.
CFO Lending will write-off nearly £32 million of outstanding debt from clients' balances with a further £2.9m due to be paid in cash directly to wronged customers.
More than 97,000 people who used the firm will benefit, equating to an average windfall of £350 per customer which must be paid by March 2017.
It comes after the Financial Conduct Authority (FCA) identified a number of "serious failings" with the firm, including computer system errors which resulted in some customers repaying more than they owed and the misuse of customers' bank details to take payments without permission.
It was also criticised for "routinely reporting inaccurate information about customers to credit reference agencies", sending "threatening and misleading" texts, letters and emails to customers, and behaving unreasonably with customers in financial difficulties.
CFO Lending was banned by the FCA earlier this year from making any new loans and now can only collect outstanding debts.
Keith Dryburgh, policy manager for Citizens Advice Scotland, said welcomed the action of the FCA.
He added: "Payday lenders should not be allowed to take advantage of consumers in these ways. We have always called for robust regulation of the lending industry, and this shows that it does work.
"We would urge consumers to report any lender which is falling short of its responsibilities to trade fairly. This case shows that they can be confident that their concerns will be properly heard and that any wrongdoing will be acted upon."
Martin Lewis, founder of MoneySavingExpert.com, said the case was evidence of how the payday loans industry has "reaped vulnerable people for every penny" and urged any potential borrowers to reconsider.
He said: “These things can be hugely financially dangerous – don’t trust these companies. It’s also worth asking yourself, if you are borrowing money to pay back in a month, what is going to be different in your circumstances that means you will be able to afford to pay it back then when you don’t have the cash now?
"For many people the answer is nothing, in which case it’s not a rescue for someone who is financially drowning, it’s splashing water over their head.”
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.
Jonathan Davidson, a director 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 CFO Lending, and are now satisfied with their progress and the way that they have addressed their previous mistakes.
On its website, CFO Lending said it "no longer provides access to high cost short term credit, otherwise known as payday loans".
It added that it was "committed to helping our customers who may be experiencing financial difficulty with the set-up of affordable and sustainable repayment options".
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