QuickQuid customers are expected to maintain their repayments despite uncertainty over the future of the payday loan company, the government-backed Money and Pensions chief said.
Enova, the US owner of the UK’s largest payday lender, said Thursday evening he was withdrawing from the country after failing to reach an agreement with the UK financial ombudsman on how to handle a multitude of complaints from QuickQuid customers.
The Money and Pensions Service has warned customers of the payday loan company not to be tempted to stop repaying.
This could mean that their credit rating could be affected and that they could face additional fees and charges as well, he said.
Caroline Siarkiewicz, Acting Managing Director of the Money and Pensions Service, which is sponsored by the Department for Work and Pensions, said: “Many QuickQuid customers won’t know what this means to them.
“While you may be tempted to stop your repayments, sticking to your regular schedule is crucial because if you’ve entered into a loan agreement, you have to stick to it.
“If you miss repayments, you could be hit with additional fees and charges, and that could hurt your credit rating as well. “
Enova had been working for months to reach an agreement with authorities after customers filed more than 3,000 complaints against the company in the first six months of the year.
“We have worked with our UK regulator to agree a lasting solution to the high number of complaints to the UK Financial Ombudsman, which would allow us to continue providing access to credit to hard-working Britons,” said the managing director David Fisher on announcing that the company will be pulling out of the UK this quarter.
Enova will levy a one-time after-tax charge of approximately US $ 74 million (£ 58 million), which includes a cash charge of US $ 43 million (£ 33 million) to support the termination of its loans in the UK.
QuickQuid is the best known brand of CashEuroNet UK.
The convenience industry has faced squeeze since it faced tougher rules from the city’s regulator, the Financial Conduct Authority (FCA), to prevent people from being trapped in debt spirals , following an outcry from charities and consumer activists.
A cap was placed on the amounts that payday lenders are allowed to charge and they had to meet more stringent FCA standards in order to continue operating.
The Financial Ombudsman Service (FOS) received over 3,000 complaints relating to CashEuroNet UK between January and June 2019.
Some 3,165 new cases relating to CashEuroNet UK were received – and 59% of complaints handled during the period were upheld in favor of consumers.
Earlier Thursday, Sky News reported that auditor Grant Thornton had been lined up to take the company under administration.
Industry insiders say the industry must constantly change to meet expectations.
Meanwhile, lenders have been inundated with customer complaints, often encouraged by claims handling companies.
These claims were one of the main reasons rival Wonga was forced to shut down a year ago.
Claims handling companies themselves fear that the failure of QuickQuid could be damaging to consumers who have already faced an industry collapse.
It is not known how many jobs at the payday lender could be at risk if it disappears.
Enova did not say what would happen to its UK customers.
The company claims to have loaned to more than 1.4 million people in the country.
Tola Fisher, personal finance expert at Money.co.uk, said borrowers will likely still have to repay their loans.
Meanwhile, those who have filed complaints against the process could face delays.
“If you are currently seeking compensation from QuickQuid for a mis-sold loan and it goes bankrupt, you will have to wait until the directors have liquidated the company,” Ms. Fisher said.
“Unfortunately, you might find yourself at the end of a long line to get your money.”