Moneybarn hit with £32.8m bill for not helping indebted customers

Written by Ruby Hinchliffe
18th February 2020

Moneybarn, the car finance company which helps those ignored by mainstream lenders, has been forced to pay nearly £33 million in fines and compensation after it was accused by the Financial Conduct Authority (FCA) of “not treating customers [who had fallen into debt over a three year period] fairly”.

Between 1 April 2014 and 4 October 2017, the firm – owned by British sub-prime lender Provident Financial – has been reprimanded for not communicating “the likely financial consequences of failing to keep up with payments […] in a way which was clear, fair and not misleading”, the FCA said in a statement.

Calling the lender’s actions “serious breaches”, the UK’s financial regulator fined the firm £2.77 million. The remaining £30 million is made up of compensation handed out to the 5,933 customers affected whom the FCA deemed to be “vulnerable” and “in financial difficulties” at the time of being offered loans.

Of those compensated, 1,400 defaulted on their loans after entering into “unsustainable short-term repayment plans” according to the regulator. Customers did not have to show any proof of distress to receive the compensation money.

“Moneybarn did not give its customers, many of whom were vulnerable, the chance to clear their arrears over a realistic and sustainable period,” says the FCA’s executive director of enforcement and market oversight Mark Steward.

“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,” Steward adds.

Moneybarn’s owner Provident Financial has seen other subsidiary doorstep lenders hit with big bills in the past for treating customers poorly. Its Vanquis unit was fined £2 million and had to pay out almost £169 million to its customers for misselling one of its repayment plans. Supposed to help customers manage their debt, the product just put borrowers further into debt.

In Moneybarn’s case, it seems the lender’s client pool – largely made up of people with poor credit histories – led to many falling into more rather than less vulnerable financial situations. The company says it was prepared since the investigation began in 2017, having put aside a £20 million provision for fines and compensation.

The lender’s MD Shamus Hodgson says he is “happy” customers affected are being compensated, confirming that the processes it’s had in place since the investigation began have been “clear, effective and appropriate”.

At the end of last year, three payday lenders folded including MMP Financial, which trades as My Money Partner and Swift Sterling, and DJS’s PiggyBank. The collapses were due to inadequate creditworthiness assessments, as the FCA clamps down on affordability checks and compliance across the UK lending sector.