FCA fines car finance lender £2.77m over arrears failings
18 Feb 2020
The Financial Conduct Authority (FCA) has slapped a £2.77m fine on Moneybarn Ltd, for poor treatment of thousands of customers when their car loans fell into arrears
18 Feb 2020
The fine was discounted by 30% from the original penalty of at least £3,963,500 because Moneybarn, the sub-prime car finance subsidiary of FTSE 250 lender Provident Financial, did not dispute the regulator’s findings.
In addition, the company has voluntarily provided redress of more than £30m to all 5,933 customers potentially affected without requiring them to demonstrate that they have suffered any financial detriment.
The FCA said the company failed to treat customers fairly when they fell behind with loan repayments while in financial difficulties, between 1 April 2014 and 4 October 2017.
Moneybarn also did not communicate the likely financial consequences of failing to keep up with payments to customers 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.
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.’
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 said 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.