The Office of Fair Trading has shut down online payday lender MCO Capital. The move sends a warning to rival lenders that they face tough action from the regulator if they don't improve their business practices.
The OFT said the firm had inadequate identity checks for loan applicants, which led to MCO being targeted by fraudsters.
They used the personal details of more than 7,000 people to apply successfully for loans totalling millions of pounds.
The lender than compounded its error by writing to people who it was aware may not have taken out loans, asking unequivocally for repayment.
The OFT said that doing so was an unfair business practice and added that MCO ignored its requests to stop the practice.
On top of that, the OFT found that MCO lacked the necessary skills, knowledge and experience to run a consumer credit business.
David Fisher, OFT Director of Credit, said: "The way MCO chased consumers for debts they did not owe was unacceptable and caused unnecessary distress to many people."
The regulator last week warned the UK's 50 biggest payday lenders that they had just 12 weeks to clean up their acts or face being closed down.
Gillian Guy, chief executive of Citizens Advice, said: "It is a victory for consumers that this payday lender has been forced to stop trading today. We hope the OFT's current 12-week deadline will put pressure on the industry to clean up its act and treat its customers fairly."
- More about:
- Loans And Lending Market