The Financial Conduct Authority (FCA) has told payday lenders that they must “pay out to settle complaints even if it threatens bankruptcy”.*
The Director of Supervision at the FCA (Jonathon Davidson) wrote a letter to firms in the high-cost-short-term credit market, explaining that lenders must treat the complaints seriously and they must warn the regulator if the subsequent redress bill is likely to send them into bankruptcy.
The warning comes after the collapse of payday lender Wonga in August, following a spike in customer compensation claims after a crackdown on the sector by the FCA. The new regulations outlined by the FCA are likely to place further pressure on the remaining lenders which include Quickquid, Sunny and Peachy.
Payday lenders are facing a fresh wave of compensation demands from claims management companies, which have been searching through old claims made by customers.
According to the Guardian: “The FCA said payday lenders must consider the ‘severity of the consumer detriment that might have arisen’ from loans granted in the past.” *
Lenders were also advised to consider starting a redress or remediation process, which may include contacting customers who have not complained.
*Payday lenders told to offer compensation for mis-sold loans
https://www.theguardian.com/money/2018/oct/15/payday-lenders-compensation-mis-sold-loans-fca-complaints – 15.10.18
Payday lenders must offer compensation for mis-sold credit, says FCA
https://www.independent.co.uk/news/payday-lenders-must-offer-compensation-missold-credit-loans-fca-a8585716.html – 16.10.18