Dublin-founded fintech pays out more than €2m over breaches

Fast-growing Dublin-founded specialist student lender Future Finance has paid out more than €2 million to customers in compensation after identifying it was in breach of two sections of the UK's Consumer Credit Act.

The company said customers have been refunded a combined €2.17 million, either in the form of credits against their outstanding balance or as cash payments to refund them for any possible interest wrongly charged to them.

The breach of sections 77A and 86B of the Consumer Credit Act was self-identified by the company during a sale of one of its loan portfolios late last year.

Future Finance said it discovered that, in some instances, statements were not sent on time due to the manual portion of the loan-servicing processes on older loans.

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According to the Consumer Credit Act 1974, if statements are not sent out at the right time, no interest can be accrued from the date that a correct statement should have been issued.

Future Finance said it immediately took action to redress the problem with customers and notified the relevant authorities. The lender said there was no financial loss or detriment caused to consumers, and the company did not profit in any way as a result of the technical irregularity.

It added that it has since implemented an automated loan software system solution to generate customer documentation and send them within the required time frame.

In the red

Newly filed accounts for Future Finance show the company fell into the red last year, partly as a result of the compensation payout and a €4.48 million hit on the sale of the portfolio. This comes in addition to an earlier €1.57 million writedown on the loans, for which the company received close to €57 million.

The company’s loan portfolio at the end of 2017 amounted to just €4.87 million, compared with €49.3 million a year earlier.

Funds disbursed on loans originated by the group totalled £55.3 million in 2017, versus £42.2 million in the prior year.

Overall, Future Finance reported a €20.4 million pretax loss for the 12 months ending December 2017, compared with a €15.8 million profit in 2016.

Interest income totalled €3 million last year versus €3.5 million a year earlier, while income from other sources rose from €284,583 to €3.4 million.

The company, which has funded about £70 million in loans to students, was established by entrepreneur Brian Norton, who relocated from Chicago to Ireland in 2013 to set up the business.

Flexible loans

Future Finance typically provides flexible loans to undergraduates and postgraduates of £2,000-£40,000 each academic year to help them pay for tuition costs and living expenses. Its primary focus is on the UK market.

Chief executive Alex King, who succeeded Mr Norton last year, recently told The Irish Times the company was looking to issue £40 million-£70 million in student loans this year. It aims to ramp this up to £100 million-£200 million in 2019.

The company, which is partnered with the European Investment Fund and more than 60 universities across Europe, employs about 80 people, the majority in Dublin.

The company recently signed a £100 million debt facility with New York-based Waterfall Asset Management, which includes an option to participate in a further £150 million extension to grow the student lending business.

The new debt facility came hot on the heels of Future Finance securing €40 million in a Series C round with existing investors to fund loans and hire more people in Dublin, London and Chicago.