UPDATE – June 15th Money Shop to close – two million customers will be informed
On June 21 the Daily Mail reported that :
In a letter sent to employees and seen by This is Money, ICL said it plans to close or sell off all of its UK stores following ‘poor financial performance’ and an ‘unprecedented number of customer complaints’.
The Money Shop has already shut down or sold many branches
Once Britain’s best-known high street payday lender, the Money Shop had 551 branches in 2014. By June 2018 this had dropped to 233.
After the Money Shop stopped providing payday loans at the start of August 2018, the branch network was cut with stores being sold to Ramsdens, Cash Converters, H&T. Its website says:
Your local store may have closed because continued trading from that location was not viable for us.
There seems to have been a widespread closure program, affecting around 80 stores because the Money Shop website now only lists 97 open shops. The Mail article reports that these will be closed or sold and that staff have been issued redundancy notices.
Payday loan regulation and affordability complaints
The Money Shop brand is owned by Instant Cash Loans Ltd (ICL).
ICL also owns two major online payday lenders: Payday UK and Payday Express. These two brands stopped lending in October 2017.
All three brands were affected by the new regulator’s rules in 2015 limiting the interest that could be charged and the number of times a loan can be rolled over.
They have also been badly hit by affordability complaints from customers who were given payday loans they could not afford to repay unless they borrowed more money.
More complaints in 2018
Affordability complaints were already a problem for the ICL brands in 2017, but this got much worse in 2018 as Claims Management Companies started sending huge volumes of complaints in. Some of these were spurious as the person complaining hadn’t had a loan from that lender.
The publicity around Wonga’s failure at the end of August 2018 will have led to another spike in complaints.
In the last half of 2018, FCA figures show that ICL received 45,000 complaints, more than any other consumer credit firm (excluding PPI complaints.)
A lender is supposed to reply within 8 weeks, but readers are then often asked for more information which then takes more weeks to consider. And then it takes weeks, sometimes more than the allowed 28 days, for people to get paid their money in the end.
But people have often been made reasonable offers, better than many other payday lenders.
The cost of paying affordability complaints
In the ICL accounts for the year to June 2018, there is a provision of £47million for the costs of settling affordability claims.
ICL was sold by its parent Dollar Financial in February 2018. As part of this sale, Dollar put aside some money to cover “certain customer regulatory claims“. Dollar’s liability to pay these is limited to this amount.
ICL’s accounts say that “the cost of redress payments in respect of affordability complaints in the UK” is a significant uncertainty. If they are greater than expected the company may not be able to continue.
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