After warning payday lenders last week that they face instance closure if they don’t behave properly, the Office of Fair Trading was true to its word this week, shutting down a rogue online lender.
The move sends a warning to all payday lenders that they face tough action from the regulator if they don’t improve their business practices.
The OFT said MCO Capital had inadequate identity checks for loan applicants, which led to it being targeted by fraudsters. Crooks used the personal details of more than 7,000 people to apply successfully for loans totalling millions of pounds.
The lender then wrote to people who it knew may not have taken out loans, chasing them for repayment. The OFT said that doing so was an unfair business practice and that MCO had ignored its requests to stop.
On top of that, the OFT found that MCO lacked the necessary skills, knowledge and experience to run a consumer credit business.
David Fisher, the OFT’s director of credit, said: “The way MCO chased consumers for debts they did not owe was unacceptable and caused unnecessary distress to many people.”
Gillian Guy, the chief executive of Citizens Advice, said: “It is a victory for consumers that this payday lender has been forced to stop trading.”
The Which? executive director, Richard Lloyd, said: “We’re pleased the OFT has shown it’s willing to take tough action to crack down on irresponsible lending. We hope they keep up the pressure on high-cost lenders who are exploiting consumers.”