OFT revokes payday lender's licence

Updated: 

A payday lender has become the first to be stripped of its licence by the trading watchdog after falling victim to fraudsters who impersonated thousands of people to take out loans.

MCO Capital, which was using the online names Help Loan and Balance Loan when it was duped, has been banned from making regulated loans to consumers.

The firm failed to carry out adequate identity checks and lacked the skills and knowledge needed to run a consumer credit business, the Office of Fair Trading (OFT) found. This made it vulnerable to fraudsters who three years ago used the personal details of more than 7,000 people to successfully apply for loans worth millions of pounds.

OFT officials said that MCO acted unfairly and caused "unnecessary distress" by writing to people to chase the debts, even though it knew they might not have borrowed the money.

The watchdog took action last August by imposing a £544,505 financial penalty on MCO Capital and revoking its consumer credit licence. MCO dropped an appeal against the move to revoke its licence with effect from March 19.

It marks the first time that a payday lender has had its consumer credit licence taken away by the OFT and comes amid a tough new industry-wide clampdown.

The OFT revoked 18 firms' licences last year, which was slightly down on the previous couple of years, during a period when debt management companies were coming under its scrutiny.

The regulator is now shining its spotlight on the payday sector and earlier this month it produced a damning report outlining evidence of "widespread irresponsible lending". The watchdog has set Britain's 50 biggest payday lenders a three-month deadline to ensure they are complying with the rules or it will also put them out of action.

The OFT said that MCO, which has also been trading online as Speed Credit, Paycheck Credit and Pop Credit, is continuing a bid to overturn the fine imposed for breaches of the Money Laundering Regulations 2007.

A statement issued by MCO Capital said: "Following discussions with the Office of Fair Trading, MCO Capital has decided to relinquish its consumer credit licence. There remains the issue of the significant historic debt that remains to be recovered and consideration is being given to the most appropriate way of dealing with this matter."

Revealed: The 10 most common scams

Revealed: The 10 most common scams