A payday lender has agreed to carry out a past business review and suspend all outbound debt collection activities after the FCA raised “serious concerns” about its practices.
In a voluntary agreement between the regulator and CFO Lending published this week, the FCA says it is concerned the lender has misused banking information provided by customers to repay outstanding debts.
CFO Lending has to carry out a skilled persons report, also known as a section 166 report, which the regulator uses to check for weaknesses in a firm’s systems. It will also have to set up a consumer redress scheme.
The FCA says there have been systems errors relating to the automatic calculation of customers’ balances, which has resulted in some customers’ outstanding loan balances being incorrect.
The regulator also has concerns that CFO’s communications to customers, its debt collection training materials and staff incentive schemes are not compliant with its rules.
It says it is concerned these practices prioritise the collection of money over fair treatment of its customers, particularly those who are vulnerable.
The FCA took over the regulation of the consumer credit market from the Office of Fair Trading on 1 April. CFO ceased to provide payday loans from 19 May, but continues to collect outstanding debts.
The FCA says its concerns arose following visits to the firm in June and July.
The s166 report will investigate whether any customers have been affected by the misuse of banking information and if so the amount of redress due.
The report will also investigate redress relating to the errors in calculating customer balances, and review all of CFO’s training and guidance materials, communications to customers and staff incentive schemes. The lender’s inbound debt collection activities will be monitored for a set period.
CFO will suspend all outbound debt collection activities, including collection calls, mail, email and text messages.
This suspension will continue until the s166 report is complete and the lender’s practices are found to be compliant with the FCA’s requirements.