Car finance lender Moneybarn has been fined almost £3 million by the Financial Conduct Authority (FCA) after failing to help vulnerable customers.
Moneybarn, which specialises in lending money to ‘sub-prime borrowers’ (people with poor or no credit history), has also paid more than £30 million in compensation to nearly 6,000 customers after the industry regulator found serious breaches over how it treated customers who fell into arrears.
The FCA slapped the sub-prime car finance lender with the £2.8 million fine after it said customers were not given a “realistic” timeframe to clear their arrears.
In a damning statement, the FCA also said that Moneybarn “did not communicate the likely financial consequences of failing to keep up with payments to customers in a way which was clear, fair and not misleading.”
More than 1,400 customers ended up defaulting on their loans after signing up to short-term repayment plans with the firm, which is owned by FTSE 250 lender Provident Financial.
The FCA said the payment plans were “unsustainable” and that many of the customers impacted by this were “vulnerable”. It said Moneybarn unfairly treated these customers, who often have a poor or no credit history, between April 2014 and October 2017.
The regulator added that Moneybarn has now voluntarily paid compensation to all 5,933 customers who were potentially affected by the firm’s failings.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Moneybarn did not give its customers, many of whom were vulnerable, the chance to clear their arrears over a realistic and sustainable period.
“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.”
The FCA said Moneybarn did not dispute its findings and agreed to redress customers, meanings its potential fine was reduced by 30%.