Customers to lose out from high cost lender compensation



The failed payday loan lender Cash Genie, which went into voluntary liquidation back in 2016, has revealed that it is very unlikely that it will be able to meet the promise it made to pay compensation to claimants. With direct lenders not falling into the requirements of the Financial Services Compensation Scheme, it means that these customers will not be covered, meaning they could very well end up losing their money completely.


The administrators of the online firm of Cash Genie, RSM Restructuring Advisory LLP, have stated that the company simply cannot afford to pay out to claimants. This has in part been due to the considerable rise in claims against Cash Genie in recent months, which administrators have argued is due to the increased public awareness of making compensation claims, as a result of large payday companies like Wonga, going out of business.


The amount that was owed by the company which traded as Cash Genie (otherwise known as Ariste Holding Limited) was the colossal amount of £20 million, which was supposed to be given to over 92,000 customers. The Financial Conduct Authority (FCA) had ordered the payday lender firm to pay this money to claimants back in 2015, having concluded that the company had been implemented unfair lending practices since its launch in 2009.


In terms of unfair lending practices that had been uncovered by the FCA, this included using customers bank details from other businesses without their informed consent in order to retrieve unsettled debts. Cash Genie was also found to charge unnecessary referral fees (amounting to £50) when it referred its customers to the debt collection arm of the firm, and to not have taken adequate steps to ensure that there were providing loans in a sensible manner, failing to check if potential customers would be able to financially afford to pay back loans they were requesting.


All creditors have been sent a proof of debt form that they need to fill in as well as a letter explaining the current situation with Cash Genie. It is still possible for customers to make a claim through Cash Genie’s customer redress programme if they believe they are owed a refund due to unfair practices, but it is considered unlikely that the payday loan lender will end up being able to pay all these claimants in full. It is believed that until all creditors have been completely accounted for, the exact amount that each claimant will receive will remain unknown.


Elsewhere, high cost lenders are moving away from the traditional payday product to offer long-term flexible loans which range from 3 to 24 months. To further improve transparency in the industry, every lender must also feature on at least one comparison website such as Choose Wisely and All The Lenders.

There has also been growth in the guarantor market, where customers are required to find an extra person they know to ‘guarantee’ repayment of their loan. Customers can apply to borrow up to £15,000 and repay over 12 to 60 months.



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