The Money Shop volunteers to refund £700,000

A UK pawnbroker that provides payday loans has announced that it will be refunding £700,000 in overages charged to its customers. The Money Shop agreed to the refunds which it says were a result of a systems error.

A total of 6,247 customers of The Money Shop are scheduled to receive a little over £100 to cover interest and default charges. The systems error to blame has been identified by the company and is being fixed to prevent similar problems in the future.

Parent company Dollar confirmed that the systems error was to blame and that a fix was forthcoming. There was no immediate indication on whether any similar systems changes were coming to other Dollar subsidiaries, including Ladder Loans, Payday UK and Payday Express. The combined companies control nearly a fourth of the total UK market for payday lending.

While the total amount is high, most of these refunds will come in the form of account credits. Roughly £79,000 in checks will be issued to customers. The vast majority will see bill credits that will reduce what they already owe.

Customers of The Money Shop will receive direct notification if they will be receiving a refund or account credit. Any inquiries may be made the local storefront office, calling the central customer service number at 0843 309 39 39 or by contacting the FCA at 0800 111 6768.

While this is a win for consumers who believe they may have been treated unfairly, some say that it is another sign that the payday loan industry is in crisis. While this is nothing new, the Financial Conduct Authority (FCA) has prioritised a new set of rules on the industry that just began on 1 July.

Already the FCA has implemented new disclosure rules that require that a customer be able to fully understand the cost of such products. That disclosure must include the interest rate as an APR as well as a representative APR that includes any upfront fees charged to the customer. Other changes have limited the number of rollovers allowed to two per loan. A rate cap of 100% APR has been proposed for 1 January 2015, which would substantially slash the rates that such firms are allowed to charge.