Payday Loan Lender Looses Credit Licence
OFT bans payday lender that chased wrong borrowers
The consumer regulator, which is closely watching payday lending practices, has revoked the lending licence of MCO Capital, which traded as Help Loan.
The Office of Fair Trading (OFT) today stepped up its action to curb rogue payday loan lenders by banning MCO Capital, which traded online as Help Loan.
The regulator revoked the company’s consumer credit licence after it failed to improve its “unfair business practices,” which included chasing non-customers for debts they had not taken.
Last August, the OFT found that MCO was failing to make identity checks on applicants, which led to it being targeted by fraudsters who used the personal details of more than 7,000 individuals to apply successfully for loans totalling millions of pounds.
The company was also accused of writing to people who it was aware may not have taken out loans, asking "unequivocally" for repayment. MCO ignored OFT requests to stop this practice.
The watchdog also said MCO lacked the "necessary skills, knowledge and experience to run a consumer credit business.”
David Fisher, OFT director of credit, said: "Removing MCO’s licence is a timely reminder that payday and text loans lenders risk losing their licences if they engage in unfair business practices. The way MCO chased consumers for debts they did not owe was unacceptable and caused unnecessary distress to many people.”
The ban has been enforced now because MCO has withdrawn its appeal. It is continuing its challenge of a £544,505 fine for breaching money laundering regulations.The decision on MCO follows an announcement earlier this month that 50 of Britain’s largest payday lenders online have 12 weeks to change business practices or risk losing their licences.
The OFT was stirred into acting after uncovering what its said was evidence of widespread irresponsible lending. It also found evidence of "deep-rooted problems" in how lenders competed with each other and proposed to refer the payday lending market to the Competition Commission.
The review said particular problem areas included lenders failing to adequately assess affordability before lending, failing to explain properly how payments would be collected and aggressive debt collection practices.It said that, despite payday loans being described as one-off, short-term loans costing an average of £25 per £100 for 30 days, up to half of payday lenders uk’ revenue came from loans that lasted longer and cost more because they were rolled over or refinanced.
Lenders were competing on speed and easy access to loans, rather than price, and relied too heavily on rolling over loans, according to the review.
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