Rent-to-own firm PerfectHome has agreed to pay out a total of £2.1m, after concerns were raised about the unfair treatment of some of its customers.
As many as 37,000 customers will receive an average of £57 each.
An investigation by the Financial Conduct Authority (FCA), found that more than 2,000 customers were given loans they could not afford.
It also comes as the actor Michael Sheen launches a plan to provide lower cost loans to vulnerable consumers.
Rent-to-own firms have been widely criticised for charging high interest rates, typically on goods like fridges and washing machines.
The FCA investigation also found that PerfectHome had:
- charged some customers for late fees on insurance, contrary to its own policy
- charged for insurance even before the goods were delivered
- failed to refund payments where contracts were quickly cancelled
Debts written off
PerfectHome said it had conducted a programme of improvements to make sure all its loans were affordable, and that customers were treated fairly.
"Unaffordable lending is not acceptable in any circumstances," said Jonathan Davidson, the FCA's executive director of supervision for retail and authorisations.
"I am pleased that the firm has taken steps to address this and provide redress to those customers affected."
The FCA said that 2,425 customers whose loans were deemed to be unaffordable would have their debts written off.
The regulator's current enquiry into high cost credit is considering whether to cap the cost of loans provided through rent-to-own firms.