Payday lender Cash Genie announced this month that it is unable to pay the £20 million in compensation it was ordered to pay its customers in 2015. Liquidators RSM say that an influx of claims in recent months has meant that the company cannot repay its creditors in full.
Cash Genie was solvent when it ceased trading in January 2016.
It had been ordered by the FCA to pay over £20 million in compensation to around 92,000 customers in 2015.
The company was found to have made serious failings since its launch in 2009, including charging unfair fees, using bank details provided to sister companies to take payment without informed consent and failing to issue annual statements to customers. Cash Genie charged unwarranted referral fees on debts that were taken up by other companies under the same group and failed to check whether customers could afford to repay their loans.
Steven Law and Nigel Millar of accountancy firm RSM were appointed to liquidate Cash Genie in 2016. They say that more than £535,000 has been paid out since the company went under.
They told the Sun:
“When the company trading as Cash Genie was placed into liquidation in 2016 both the directors and liquidators believed there would be sufficient funds to pay creditors.
“But in recent months, the company has received a drastic increase in claims, due in part to coverage of similar cases which has made more creditors aware that they may have a potential claim.
“Consequently, the funds available are now insufficient to settle all claims in full including statutory interest.
“As a result the joint liquidators have announced that they are intending to move from a solvent liquidation process into an insolvent liquidation process, known as a creditors’ voluntary liquidation.
“Creditors can still submit their claims in the usual way, but it is now unlikely that new claims will be paid in full.”
It is likely that the spike in claims ‘in recent months’ was linked to the demise of Wonga and an increased public awareness of unfair lending practices. Specialised claims companies, online application tools and success stories have encouraged many consumers to come forward.
The movement to liquidation was voted on by unsecured creditors – that is, customers who have had their claims agreed but not paid. Creditors who did not vote by this Wednesday were assumed to agree to the proposal. The result of the vote is not yet clear, but debt adviser Sara Williams of Debt Camel noted there did not appear to be any viable alternatives for the firm.
All creditors, including those with agreed refund amounts, have been sent a proof of debt form to complete along with a letter explaining the situation. Customers who believe that they are owed a refund are still able to make a claim via Cash Genie’s customer redress programme.
Until all creditors have been accounted for, it’s impossible to estimate how much each claimant will receive. RSM say that they hope to finalise payments within the next six months.
Payday loans are commonly used to help workers manage their cash flow until their next pay date. Whilst offering loans funded within minutes is helpful to many, they often come at a price, with some payday lenders charging up to 1,200%. Payday loans should be approached with caution and customers should consider how they are going to repay before they proceed.