The Financial Conduct Authority, the City’s main watchdog, was forced to step in and probe Motormile Finance UK’s methods of recovering money from customers.
After finding that the firm would harass its clients, often calling them up to five times a day, the FCA gave the firm a thorough dressing down and ordered it to wipe the debts of those affected – a sum amounting to around £414million.
As well as this, the company will also have to pay out some £154,000 compensation to 2,148 customers who had already started repaying their debts.
Motormile, which also trades as MMF, MMF Debt Purchase and MMF UK, buys up debt portfolios – such as old payday and car finance loans – and then looks to recover the debts.
However, the FCA also said the firm’s IT systems weren’t up to scratch, and as a result it had failed to make sure that it was demanding the correct sums of money from people.
‘This in turn led to unfair and unsuitable customer contact for recovery of those sums,’ the FCA added.
As a result of the redress programme agreed between the FCA and Motormile, the vast majority of the 500,000 affected customers will see their debts written off – each one typically running to several hundred pounds.
Jonathan Davidson, director of supervision for retail and authorisations at the FCA, said: ‘We have agreed this package, and previous action, to protect the customers of Motormile from unfair practices. We have worked closely with Motormile, and are now satisfied with their progress and the way that they will address their previous mistakes.’
Earlier this year the FCA imposed a restriction on Motormile that meant it could only contact a debtor up to two times in writing, and two times over the phone each week.
Motormile apologised to its customers with a message on its website, and said they would be contacted regarding redress by email or post in the coming weeks. It hopes to complete the redress scheme by February.
Denise Crossley, chief executive at Motormile, said: ‘Working so closely with the FCA has provided MMF with a very clear understanding of what is expected under the new regulatory regime and I can assure our customers that we have embraced this. We apologise to all of the affected customers and will be addressing the issues through the redress scheme we have agreed with the FCA.’