Payday firm chased customers to repay non-existent loans

Friday 10th August 2012

A payday lender which wrote to consumers demanding repayment when it knew they might not have taken out loans has been banned by the OFT.

The OFT said that the firm, MCO Capital, had ignored the OFT’s requests to stop this practice.

MCO has now been fined £544,505 and had its consumer credit licence revoked.

The OFT said it also breached money laundering regulations by failing to adequately verify the identities of loan applicants.

It is thought that MCO’s failures led to it being targeted by fraudsters who used the personal details of over 7,000 people to successfully apply for loans amounting to millions of pounds.

David Fisher, OFT director of credit, said: “MCO’s failure to put adequate procedures in place made it vulnerable to fraud. The way in which MCO then wrote to consumers to collect debts caused unnecessary distress and inconvenience to thousands of people.

“This financial penalty sends out a strong message that businesses lending to consumers must have adequate anti-money laundering procedures in place.”

The OFT said that consumers who are pursued by a lender for a debt they do not owe should write to the lender and, where appropriate, the debt collection agency, making it clear why payment is being refused.