The Office of Fair Trading has shut down payday lender, MCO Capital Ltd, for failing to carry out sufficient identity checks. It means the company gave millions of pounds in loans to fraudsters and then harassed the victims for payment.
So how did it happen, and what can you do if you are victim of this sort of fraud?
The banThe firm - which traded as Speed Credit, Paycheck Credit and Pop Credit - has had its consumer credit licence revoked, and is banned from making any more loans to the public.
The Office of Fair Trading first ruled on the company back in August 2012, but at that point the lender launched an appeal. It has finally dropped its appeal (although it continues to fight the £544,505 fine for breaches of the Money Laundering Regulations), so the ban starts today.
The firm fell spectacularly short of adequacy in terms of the checks it did on loan applicants. The OFT felt that these shortfalls led to the business being targeted by fraudsters, who used the personal details of over 7,000 individuals to apply successfully for loans totalling millions of pounds.
Perhaps unsurprisingly, the OFT found that MCO lacked the necessary skills, knowledge and experience to run a consumer credit business.
At the time, the OFT stepped in and demanded the company stopped sending these letters, but it refused. For all these reasons, the OFT decided to revoke MCO's consumer credit licence.
David Fisher, OFT Director of Credit, said: "The way MCO chased consumers for debts they did not owe was unacceptable and caused unnecessary distress to many people."
What can you do?While this firm has been shut down, there are still instances of fraud being reported by the customers of payday lenders.
The OFT says that if you are contacted by a lender about a debt you do not owe, your first stop should be with the lender: contact them in writing and let them know that this is a case of fraud. If your case has been passed to a debt collection agency, you should write to them and let them know this is not your debt. You also need to let your bank know.
It may also be worth getting in touch with a credit report service such as Equifax, Experian or Call Credit, to check whether any more loans have been taken out in your name. Finally you should report it to Action Fraud, who can investigate and prosecute those responsible.