Dollar, trading as The Money Shop, first attracted the attention of the Office of Fair Trading in February this year when a review of customer calls found loans were being approved outside of its normal lending criteria.
The Financial Conduct Authority (FCA) pursued the investigation when it took over control of the consumer credit market in April.
Dollar has agreed to refund the sum to 6,247 customers which it said were affected due to a ‘systems error’.
Clive Adamson, director of supervision at the FCA, said all lenders must carry out the correct checks to make sure customers can afford to pay back their loans.
He added: “We are pleased that Dollar is working with us to put matters right for its customers and to ensure that these practices are a thing of the past.”
Dollar will contact all affected customers immediately and expects to provide refunds in cash totalling £79,000.
The remainder of the affected customers will have their outstanding balances reduced.
The payday lender said it is committed to improving its approach to affordability assessments and is appointing an independent person to review its lending decisions who will report back to the FCA.
Dollar operates in the UK under the trading names of Payday UK, Payday Express, The Money Shop and Ladder Loans.
It is the UK’s second largest payday lender and the FCA’s most recent information suggested that it has around 24% share of the payday market.
