One of Britain’s biggest payday lenders is shutting its doors after it was hit by thousands of complaints and a clampdown by regulators.
QuickQuid is to cease trading in the UK, a year after its rival Wonga also closed down as the sector’s sky-high interest rates came under fire from MPs and tougher rules were introduced. It blamed “regulatory uncertainty” for the closure.
The company’s US owner Enova’s chief executive David Fisher said it was disappointed it had been unable to reach a “sustainable solution” with regulators over the level of complaints made as the rules were tightened.
The Financial Conduct Authority (FCA) had received more than 3,000 complaints in the first six months of this year alone about the lender.
New rules imposed by the FCA included a cap on the amount lenders are allowed to charge consumers to borrow.
The announcement formed part of Enova’s third-quarter results update, where it reported a 12% rise in global revenue to £257m ($330m) and increased gross profit margins.
Enova, which says it has more than six million customers worldwide, said it would take a one-off hit of around £58m ($74m), including a cash charge of £33m as part of the closure plans.
The number of staff and customers affected, and what the closure plans will mean for consumer debts and complaints, is not yet clear.
Fisher said in a statement: "Over the past several months, we worked with our UK regulator to agree upon a sustainable solution to the elevated complaints to the UK Financial Ombudsman, which would enable us to continue providing access to credit for hardworking Britons."
"While we are disappointed that we could not ultimately find a path forward, the decision to exit the U.K. market is the right one for Enova and our shareholders. Looking ahead, we believe that our diversified product offerings provide meaningful growth as we allocate our resources where we see the greatest opportunities."
Helen Barnard, deputy policy director at the Joseph Rowntree Foundation, told the BBC typical payday loan customers were struggling on low pay and borrowing to cover day-to-day costs or fluctuations in income.
She told the BBC: "The trouble is what it is doing is concentrating on a group of people who are doing this because they really need the money. They can't get it anywhere else but it is sucking them deeper, it is sucking people in poverty deeper in and then it carries on.
"Most of the people who take out a payday loan, its not just a one-off - three-quarters of people are going to be taking out more than one in a year so they are constantly having to pay more and more interest."