Second-largest payday lender exits the market

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The Cheque Centre, the second biggest payday lender in the UK, has withdrawn from the market, after coming under scrutiny from the Financial Conduct Authority over the way it approached customers who ran up debts.

What did it do wrong? And what does it mean for you?

The firm has over 450 branches across the UK, and operates a payday loans business, as well as selling longer-term loans, and running pawnbroking and foreign currency exchange services.

It was being examined by the FCA - which started overseeing the operations of payday loans companies in the UK last month and introduced stricter rules for the industry on 1 April.

What was wrong?

It was looking into the way the business approached customers who had sums outstanding on their payday loans. The FCA said that poor practice was uncovered by the former consumer credit regulator, the Office of Fair Trading - and FCA staff on secondment at the OFT.

In late March, the Cheque Centre was sent a letter setting out the regulators' concerns. The Cheque Centre stopped offering payday loans at the beginning of April and has now withdrawn from the market.

It has also agreed to stop telephoning customers who owe the business money, until it can show the FCA that it has improved its processes. However, it will still continue to take payments from people who owe the firm money.

It has suspended the sale of its 12 month loans too, until staff have been retrained to ensure they know how to abide by the FCA rules.

Success

Martin Wheatley, the FCA's chief executive, said in a statement: "This is an early victory for people that use payday lenders. We made our tougher expectations clear to Cheque Centre and they have wasted no time in making changes. I have said before that firms would need to dramatically improve their operation or exit the market, and we are now seeing that happening."

He also signalled that this was unlikely to be the last time the watchdog stepped in and demanded changes from a payday lender. He said: "other payday lenders should take note."

What should you do?

The FCA says that any customers of the firm that are affected by this move should contact the firm on 0800 243028. However, it makes clear that those who have outstanding loans will not need to do anything differently and will still have to repay their loan.