The UK's second biggest payday lender is to refund over £700,000 of interest and default charges to 6,247 customers who couldn't afford to borrow as much as they were given.
The firm involved is Dollar, an American group which has 24 per cent of the payday market in the UK and includes The Money Shop, Payday UK, Payday Express, and Ladder Loans.
The mistake was due to a "systems error" which resulted in loans being approved for amounts above normal lending criteria between between January 2013 and April 2014.
The financial watchdog, the FCA, says Dollar has agreed to provide cash refunds totalling £79,000, with the remainder of customers having their outstanding balance reduced.
Later this week the FCA is expected to outline a cap on the cost of credit from payday lenders.