Payday lender The Money Shop in talks for £ 18million payment to customers
The company is reportedly closing a gigantic compensation pot for more than two million customers, in a move that echoes the collapse of short-term payday lender Wonga last year.
Image: Chronicle of Newcastle)
Distressed payday lender The Money Shop is said to be in talks for a £ 18million payment to customers, echoing rival Wonga’s collapse last year.
The short-term credit provider and pawnshop chain are set to close a pot for more than two million customers, linked to affordability complaints fueled in large part by claims management companies.
It comes after the company wrote to employees last month saying an “unprecedented number of customer complaints” about historic wrongdoing meant it was “no longer viable to continue negotiating,” putting 427 jobs in danger.
Shortly after sending a letter, it emerged that the company had suffered heavy losses of over £ 87million in the year up to June 2018.
Instant Cash Loans (ICL), which owns The Money Shop, Payday Express and Payday UK, has been in talks with the city watchdog for several weeks over the program, according to Sky News.
It is understood that ICL will begin writing to up to 2 million clients on Tuesday seeking their support for a plan of arrangement, under which they could receive payments if they have a valid complaint about a loan they have contracted with the company.
ICL is owned by US hedge fund HPS Investment Partners, which the broadcaster says made the decision to shut down the company, which has been among the largest payday lenders in the UK for at least a decade.
The plan of arrangement, which is a court-sanctioned process requiring creditors approval, is expected to involve a vote in September.
ICL stopped providing high-cost short-term loans last August, but has since been overwhelmed by complaints about accessibility criteria.
Complaints are largely fueled by claims handling companies – a practice which has also led to the disappearance of Wonga in 2018.
ICL, which has around 220 stores in the UK, has already closed several branches in recent months and sold more than 20 stores earlier this year to competing chain Ramsdens.