The financial watchdog has fined car finance provider Moneybarn £2.77m for treating customers unfairly when they fell behind on loan repayments.
Moneybarn, which is part of Provident Financial, has voluntarily repaid over £30m to almost 6,000 customers potentially effected by the failings, the Financial Conduct Authority (FCA) said.
The FCA also found that Moneybarn was insufficiently clear with customers about the likely financial consequences of failing to keep up with payments.
Over 1,400 of Moneybarn’s customers defaulted after entering into unsustainable short-term repayment plans, the watchdog said. The breaches occurred between April 2014 and October 2017.
Moneybarn provides car financing to customers who typically cannot access loans from mainstream lenders due to their personal circumstances. The FCA said those customers had an increased risk of being financially vulnerable.
“Moneybarn did not give its customers, many of whom were vulnerable, the chance to clear their arrears over a realistic and sustainable period,” said Mark Steward, the FCA’s executive director of enforcement.
“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. These were serious breaches,” he added.
Steward said the City watchdog had given Moneybarn “significant credit” for the £30m voluntary repayment when assessing the size of fine to impose, adding that the firm had also qualified for a 30 per cent discount on the penalty for agreeing to accept the regulator’s findings.
If it had not accepted the findings, it would have faced a penalty of at least £3.96m, the FCA said.
“Throughout the investigation we worked collaboratively with the FCA. We are happy that all customers potentially affected by these findings have been fully compensated for any detriment they might have suffered,” said Moneybarn managing director Shamus Hodgson.
“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,” he continued.
“As market leaders in this area, we’re proud to set an example for others in the industry to follow.”