Motormile Finance UK, a debt purchase and collections firm, is to write-off the debt of more than 500,000 customers for failures in its due-diligence and collections processes.
According to the Financial Conduct Authority (FCA) Motormile had "inadequate systems and controls over due-diligence".
As a result, said the regulator, the firm would write-off £414m of debt where it has been "unable to evidence the outstanding debt balance is correct and properly due". After agreeing terms with the regulator, Motormile's redress will also consist of £154,000 in cash payments to approximately 2,000 of its customers.
"We have agreed this package, and previous action, to protect the customers of Motormile from unfair practices," said FCA director of supervision - retail and authorisations Jonathan Davidson.
He added: "We have worked closely with Motormile, and are now satisfied with their progress and the way that they will address their previous mistakes. This evidences the importance of conducting sufficient due-diligence and how failing to do so leads to poor treatment of customers."
In February 2015, the FCA appointed a skilled person to review Motormile's loan portfolios and collections processes - including its due-diligence. The regulator said the firm has since amended its processes, systems and controls to mitigate the risks it identified.
The FCA authorised the firm in August after being satisfied the "poor practices" it witnessed at Motormile were historical and that "major changes have been implemented by the firm". The regulator said a new, bespoke IT system and the appointment of a new CEO should be sufficient to "ensure compliant standards are maintained".
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