London, England -- (SBWIRE) -- 08/24/2012 -- The Office of Fair Trading has imposed a £544,505 fine on the online payday lender MCO Capital Limited (MCO) for breaching the Money Laundering Regulations 2007. The OFT has also stopped MCO's ability to lend by revoking their consumer credit licence, partly as it was found that MCO failed to adequately verify loan applicant's identities.
It is thought that the failures of MCO led to the company being targeted by fraudsters who successfully managed to apply for millions of pounds worth of loans using the personal details of over 7,000 individuals. MCO were also found to have engaged in unfair business practices by writing to people, who they were aware may not have taken out a loan, asking for repayments.
Requests to stop this practice from the OFT were ignored by MCO, who were additionally found to lack the necessary skills, knowledge and experience to run a consumer credit business thus leading to the revocation of MCO's consumer credit licence.
David Fisher, OFT Director of Credit, said: "MCO's failure to put adequate procedures in place made it vulnerable to fraud. The way in which MCO then wrote to consumers to collect debts caused unnecessary distress and inconvenience to thousands of people. This financial penalty sends out a strong message that businesses lending to consumers must have adequate anti-money laundering procedures in place."
The industry also came under fire recently when it was revealed payday lender Wonga would be the new sponsors of Saturday night TV show 'Red or Black'.
There has been outcry for the Simon Cowell owned show, fronted by Geordie duo Ant and Dec, to terminate their association with Wonga - especially by Labour MP Stella Creasy who has been vocal in her criticism of the lender.
However, the payday lending sector has enjoyed a boom in the midst of the recession. Market analysts even predict that this new line of credit could outstrip credit card borrowing in the near future.
Payday lending has managed to fill a gap in the market, providing over 2 million borrowers with short-term loans in 2011. However, the OFT's investigation, coupled with the outcry against Wonga has brought to light the need for borrowers to shop around for their payday loans.
Many payday lenders do not enjoy the advertising power of Wonga, yet have a much lower APR than the 4,214%. It has also highlighted the need to borrow from payday lenders who follow the strict guidelines set by the OFT.
When looking for a short-term loan, payday brokers can help borrowers find a short-term loan with a representative APR of just 1,734% from trusted lenders conforming to regulations set by the OFT.
Alternatively if you enjoy a good credit rating, you bank may be able to provide personal unsecured loans for a fraction of this interest.
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