Car Finance Provider Moneybarn Fined £2.77 Million For Inappropriate Treatment Of Borrowers
18 Feb 2020
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- Authorities have fined Moneybarn £2.77 million for not providing adequate help to borrowers undergoing financial difficulties when their balances fell into arrears.
- The fine is much lower than what could have been imposed since Moneybarn, after discussing with the FCA, decided to voluntarily pay out £30 million to its customers that may have been impacted by its behavior.
A fine has been imposed on Moneybarn of £2.77 million by regulatory authorities in the UK for having failed to provide customers with the help they needed to manage difficulties stemming from their debt.
The car finance provider has given out £30 million so far as compensation to 6,000 of its customers that had been impacted by the lender’s actions.
According to the Financial Conduct Authority, the lender did not provide sufficient opportunity to its customers to clear out any balances in arrears by allowing them a realistic time period to do it.
Moneybarn has stated that those customers who may have been impacted have now been given full compensation for any potential damages they may have suffered.
The fine that has been imposed on Moneybarn by the authorities cover customers who had fallen behind on their loan repayments during the period of 1st April 2014 to 4th October 2017 due to ongoing financial difficulties.
The business model followed by Moneybarn targets customers that are otherwise rejected for car loans elsewhere due to their current circumstances. These customers often have a bad or no credit history, and are facing or have recently faced financial issues in other forms such as unemployment, health issues, or similar life events, according to the FCA. Hence, such customers are already in a financially vulnerable state and, in case they fall into arrears with a loan, their financial situation starts to deteriorate.
As per Mark Steward, who is an executive director at the FCA overlooking its enforcement and market oversight section, Moneybarn did not provide clarity to such financially vulnerable customers about their options to exit a loan provided by the lender and how it could impact their personal finances. Thus, many ended up suffering from high termination charges.
Steward highlighted that the fine is much lower as the lender, after discussing with the regulatory authority, voluntarily decided to pay out £30 million to affected customers.
Moneybarn is owned by Provident Financial and provides car loans. This is not the first time that a Provident Financial lender has been fined. In 2018, authorities imposed a £2 million fine on Vanquis
, another Provident Financial lender, for providing a credit card to its customers that put them in greater debt instead of helping them manage debt as was initially promised. Vanquis also paid back £169 million to affected customers as a result of regulatory action.
According to Shamus Hodgson, who heads Moneybarn, the firm has been making improvements in the way it operates since 2017 and aims to fully comply with guidelines for lenders that have been set by the FCA. Hodgson also stated that the processes at Moneybarn are now clear, appropriate, as well as effective, at least since 2017.
Moneybarn was scrutinized for the period spanning between April 2014 to December 2017, both inclusive, during which it gave out 71,254 consumer loans.