Payday lender Cash Genie has agreed to refund or write-off £20 million relating to 92,000 customers after admitting to a series of unfair practices, the City watchdog said.
Failings included charging interest equivalent to 30% on the outstanding loan balance per month - a higher rate than stated in customer contracts - as well as unfair charges such as £50 to transfer customers to a sister debt collection firm.
There was even a £30 fee where customers applied for money back believing that Cash Genie had taken an unauthorised payment from their account, the Financial Conduct Authority (FCA) revealed.
Cash Genie notified the FCA in June last year that it had engaged in unfair practices and subsequently agreed to an independent review of its past business and to carry out a redress scheme.
It has now agreed to provide £10 million in redress and has already written off £10.3 million of fees and interest.
Linda Woodall, acting director of supervision for retail and authorisations at the FCA, said: "We have been encouraged that Cash Genie has been working with us proactively and openly to put things right after these issues were reported.
"Although standards in the consumer credit sector are improving, it is disappointing that examples of poor practice in the payday market keep surfacing.
"We expect all firms to notify us of any unacceptable past or current practices and provide appropriate redress to anyone affected."
Failings outlined by the FCA - dating back to the launch of Cash Genie in September 2009 - also included loans being refinanced or rolled over without customers' request or consent and without undertaking appropriate checks.
The FCA said banking information provided to these websites had been used to take payment for existing Cash Genie loans without customers' informed consent.
It also said Cash Genie failed to send annual statements to customers who had not repaid their loans after 12 months, meaning that it should not subsequently have applied further fees or interest to accounts.
The FCA said the lender had agreed to write-off or refund fees and charges which should not have been added to accounts as well as "rollover" interest where loans had been rolled over - extending the time period of the loan - inappropriately.
It is also refunding payments taken without authorisation and writing off outstanding balances on accounts affected by this practice, as well as writing off or refunding interest and fees added to accounts after an annual statement should have been given.
The firm aims to contact all affected customers by September 18.
Cash Genie stopped offering new loans to customers last September. US-based parent company EZCORP said in October that the firm would exit the UK payday lending market in 2015 as part of its new business strategy.
Redress due under the latest announcement relates to a period before a price cap for high-cost short term credit was introduced at the start of this year.
A Treasury spokesman said: "The action announced today is exactly why we created the FCA."
Last October another payday lender, Wonga, said it had written off a total of £220 million of debt belonging to 330,000 customers after admitting making loans to people who could not afford to pay them.
In June last year, Wonga was ordered to pay compensation of £2.6 million by the FCA after sending fake legal letters to 45,000 customers.
Today's announcement on Cash Genie comes as the Financial Ombudsman publishes latest figures showing that from April to June this year it had taken on 452 new payday loan complaints.
In the whole of the year to the end of March 2015 it saw 1,157 complaints, of which more than two-thirds were found in favour of the consumer.
The ombudsman said: "There has been a significant increase in the number of payday lending complaints brought to the ombudsman over the past couple of years - and we're currently investigating around 150 new cases each month.
"A worrying number of lenders failed to tell the consumer that they are entitled to bring their complaint to the ombudsman, should they be unhappy.
"In many cases, the treatment of vulnerable customers has been unacceptable.
"It's also apparent from the conversations we've had that many of the people we've spoken to are reluctant to admit they're struggling financially."
Complaints centred on lenders refusing to accept a suitable repayment plan; consumers left without money to pay their bills; poor administration and customer service; and debt chasing.
There were also concerns about damage to people's credit records, while some consumers complained that a payday loan had been taken out in their name fraudulently.
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