Debt collection company Motormile has agreed to write off the payday and car finance loans of over 500,000 people after being criticised by the Financial Conduct Authority (FCA) regulator for the way it was pursuing people over their debts.
The amount to be written off amounts to around £414 million of debt.
As part of its redress scheme, Motormile will also pay out £154,000 in cash to approximately 2,000 of its customers.
Most of the people who received a letter or email telling them that debt had been passed on to Motormile have had their debt written off. Those who started making payments to the firm will also be repaid.
Motormile, also known as MMF, MMF Debt Purchase and MMF UK, specialises in buying up old payday loans and other debts from lenders who didn't manage to recoup the cash. The company then attempts to recover this money itself.
The debt collectors reportedly bought payday loans from a number of lenders including Cash Genie, Peachy, Mr Lender, Lending Stream, Swift Sterling, WageDayAdvance and PoundsTillPayday as well as car finance loans.
Why has this action been taken?
The FCA said that after buying debts, Motormile failed to carry out the necessary “due diligence” to ensure that the amount of money they told customers they owed was correct.
Forums on websites like the Consumer Action Group feature posts from users have posted copies of emails they said they received talking about doorstep collection agents and default notices placed on their credit files.
In August 2016 the FCA confirmed that poor practices were “historical” and that major changes had since been made including the appointment of a new Chief Executive Officer.
Denise Crossley, Chief Executive Officer at Motormile, said: “MMF are now fully authorised by the FCA which is testament to them witnessing first-hand the serious approach we take to our regulatory responsibilities and our desire to treat customers fairly.
“We will strive to build on the excellent reputation we have in the market and continue to put customers first in everything we do.”
Customers don’t need to take any action as MMF will contact those affected by February 2017. The company has set up a dedicated webpage with further information.