Moneybarn repays £30million to 6,000 customers who were treated unfairly over loans they couldn’t afford
CAR finance provider Moneybarn has repaid more than £30million to almost 6,000 customers after letting them take out loans they couldn’t afford.
The city watchdog has also slapped a £2.77million fine on the firm after it was found to be treating borrowers unfairly when they fell behind on repayments.
Moneybarn is owned by of Provident Financial plc, which also owns doorstep lenders Provident, and offers finance deals for secondhand cars to borrowers with poor credit history.
As a result, these borrowers typically can’t access finance deals from mainstream lenders because they are at greater risk of being made seriously worse off if they fall into arrears.
The investigation by the Financial Conduct Authority (FCA) also revealed that the lender didn’t sufficiently communicate what would happen if they defaulted on payments before taking out an agreement.
As a result, 1,400 customers – many of whom were vulnerable due to things like unemployment or ill-health – ended up defaulting on payments and being pushed further into debt.
The company was found to fail customers in financial difficulties between April 1 2014 and October 4 2017.
The financing firm agreed to payback 5,933 customers who may have been affected by the failings, without having to prove it had a negative impact on their finances.
Borrowers have already been automatically compensated through a redress scheme carried out last year.
It’s not clear exactly how much each customer received, but an equal share of the payout it £5,056 each.
Mark Steward from the FCA, said that the failings by Moneybarn were “serious breaches”.
He added: “Moneybarn did not give its customers, many of whom were vulnerable, the chance to clear their arrears over a realistic and sustainable period.
“It also did not communicate clearly to customers, in financial difficulty, their options for exiting their loans and the associated financial implications, resulting in many incurring higher termination costs.”
Moneybarn said that it its processes had “been amended” in October 2017 to address the concerns raised by the FCA.
The fine was also reduced by 30 per cent because it didn’t dispute the investigations findings, otherwise it would have been ordered to pay closer to £4million on top of the redress.
Shamus Hodgson, managing director of Moneybarn said: “The FCA has clarified its expectations of lenders in these important aspects of customer treatment, which will provide guidance for all finance companies within the motor industry.”
More to follow…
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