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FCA fines Moneybarn £2.77m for unfair treatment of 'vulnerable' customers

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The Financial Conduct Authority (FCA) has fined automotive finance provider Moneybarn £2.77 million for failing to treat "vulnerable" customers fairly when they fell behind with loan repayments while in financial difficulties.

The FCA said that the subsidiary of Provident Financial plc, a FTSE 250 company, did not give its customers the chance to clear their arrears over a realistic and sustainable period or communicate the likely financial consequences of failing to keep up with payments in a way which was clear, fair and not misleading.

More than 1,400 customers – many of whom were vulnerable – subsequently defaulted after entering into unsustainable short-term repayment plans, the FCA said. 

Imposed for “serious breaches” of FCA regulations during a period between April 1, 2014, and October 4, 2017, the fine could have been at least £3,963,500 more were it not for the firm’s agreement to accept the FCA’s findings and credit given for the £30m redress paid to 5,933 customers potentially affected by its failing.

These measures qualified Moneybarn for a 30% discount.

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.

“After discussions with the FCA, Moneybarn voluntarily paid more than £30m in redress to customers potentially affected by its failings.

“The FCA gave Moneybarn significant credit for this in assessing the size of the penalty imposed.”

Moneybarn provides motor finance for used vehicles predominantly to customers who typically cannot access finance from mainstream lenders due to their personal circumstances.

The FCA noted in a statement issued today (February 17) that such customers are at “an increased risk of financial vulnerability” as they often have a poor or no credit history or past problems with credit due to periods of unemployment, ill-health or other adverse life events. 

They are also at greater risk of suffering detriment if they fall into arrears, it said.

Moneybarn said in a statement issued today that it had "worked collaboratively with the FCA for the duration of its investigation".

Managing director, Shamus Hodgson, said: “We are happy that all customers potentially affected by these findings have been fully compensated for any detriment they might have suffered.

"The processes we have had in place since 2017 are clear, effective, and appropriate.

"The FCA has clarified its expectations of lenders in these important aspects of customer treatment, which will provide guidance for all finance companies within the motor industry. As market leaders in this area, we're proud to set an example for others in the industry to follow."

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