Release Date: 17th February 2020
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined car finance provider Moneybarn Ltd £2.77 million for unfair treatment of customers in arrears between 1 April 2014 and 4 October 2017. Moneybarn failed to treat customers fairly when they fell behind on loan repayments, particularly those facing financial difficulties, and did not communicate the financial consequences of missed payments in a clear, fair, and non-misleading manner.
More than 1,400 customers, many of whom were vulnerable, defaulted after entering into unsustainable short-term repayment plans. In response, Moneybarn voluntarily provided over £30 million in redress to all 5,933 potentially affected customers, without requiring them to prove financial detriment.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, stated, “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, a subsidiary of Provident Financial plc, primarily serves customers who cannot access finance from mainstream lenders due to their personal circumstances. These customers are often at higher risk of financial vulnerability and suffer more significant detriment if they fall into arrears.
Moneybarn did not dispute the FCA’s findings and agreed to the imposed fine, qualifying for a 30% discount in addition to credit for the redress paid. Without these considerations, the fine would have been at least £3,963,500.
Key Takeaways:
- Fair Treatment: Ensure customers in financial difficulties are treated fairly, with realistic and sustainable repayment plans.
- Clear Communication: Clearly communicate financial consequences and options to customers to prevent misunderstandings and additional costs.
- Vulnerability Consideration: Pay special attention to the needs and risks of vulnerable customers to avoid exacerbating their financial difficulties.
- Proactive Redress: Voluntarily providing redress can mitigate penalties and demonstrate commitment to rectifying failings.
In conclusion, the FCA’s fine on Moneybarn highlights the importance of fair treatment and clear communication with customers, especially those in vulnerable financial positions. Firms must ensure robust systems to support customers in financial difficulty and prevent similar regulatory breaches.
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