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Payday Lender Cash Genie to Repay £20m to Customers!
Cash Genie, previously one of the most popular payday loans lender in UK, is to repay about £20m to around 92,000 customers who got pressured with unfair fees, automatic rollovers, and charges incurred due to debt collection its sister debt collection firm. Cash Genie is owned by Ezcorp, a US pawn chain.
Cash Genie will repay £10m in redress while writing off about £10.3m in fees and interest. The company has been in talks with the FCA for more than a year regarding its lending practices and will withdraw this year from the UK payday loans market.
The Reason Behind
Cash Genie is a part of the Ariste Holdings, which also trades as Paydayiseveryday.co.uk and Txtmecash.co.uk had added some extra fees for those borrowers who did not repay their dues on time. This included late fees of £15, a ‘trace fee of £45, and a £12 fee for each letter sent to the borrower. All these penalties were charged without verifying whether the customer can afford them or not.
Cash Genie also charged some other unfair fees like an automatic fee of £30 which was levied on the customers whenever they tried to recover the unauthorised withdrawals made by Cash Genie from their accounts. This fee was charged using the chargeback service of the customers’ banks, reported the FCA.
The best part is that this was not any sting operation or FCA crackdown, but the Cash Genie lending company itself came forward voluntarily and accepted that it had been unfair to the customers by charging unfair fees. The company offered itself to the FCA for an independent review.
What Else the FCA Found Out
In the review done by the FCA, it was found that Cash Genie was following such unfair practices right from its launch in the year 2009. The regulator criticised the company for charging £50 to the customers for transferring them to its in-house debt collection agency Carter Forbes, even though Cash Genie had this service for free.
FCA has reported that the customers need not take any action as Cash Genie has stated that it will itself contact the affected customers by 18th September. The company will even forgive the interest rates charged above 30pc of the total outstanding balance each month.
Meanwhile, the lender has made a statutory statement on its website. Cash Genie has stated on its website that it is performing a redress program and so has stopped all the lending services in September 2014.
Linda Woodall, acting director of retail supervision in the FCA, gave a statement saying,
"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.”
She further added that,
“Although standards in the consumer credit sector are improving, it is disappointing that examples of poor practice in the payday market keep surfacing. We expect all firms to notify us of any unacceptable past or current practices and provide appropriate redress to anyone affected.”
Meanwhile, FCA’s outgoing head Martin Wheatley made a prediction that the combination of new permissions and a price cap on fees and interest rates will push most of the short-term lenders out of the payday lending business in UK.
Some of the largest lending companies including The Money Shop and Wonga have made changes to their business models in order to provide loans with longer durations.
The Financial Ombudsman Service had created a team last year for handling complaints related to payday loans as fast as possible so as to protect the borrowers from extra interest and late fees. Around 1,157 complaints were lodged last year with the organisation on such lenders and further 452 cases have been opened since April.
Payday loans lender in UK who lend short-term loans to the borrowers to see them through their next payday are being kept under strict watch for charging sky-high interest and fees.
Starting this year, the FCA had reviewed all the previous regulations and introduced new, stricter rules this year for capping interest rates and various fees levied on payday loans.
Since the financial crisis, the FCA, under the guidance of Martin Wheatley (Chief Executive), has tightened the net around the financial industry and has imposed millions of pounds in fine to the companies for misconduct. Martin Wheatley, has got tough on the financial services industry since the financial crisis, imposing millions of pounds in fines on firms for misconduct.