The FCA said Dollar Financial customers may have suffered as a result of the firm's affordability checks, debt collection practices and system errors.
The compensation payouts agreed with the FCA relate to the affordability of loans taken out in the year to April 2015, as well as the collection of repayments on loans taken out between January 2013 and the end of April 2015.
In July 2014 - the firm undertook to review its lending practices and refund customers a total of £700,000.
Stuart Howard, chief executive of Dollar Financial since November 2014, said: "As the new CEO, I accept the findings of the review, and apologise to anyone who may have 'suffered difficulties' as a result
"It is proper that we put things right where they have gone wrong, and I have gone further than the review in reforming the way our business operates to reflect the company aim of being the most responsible lender in its marketplace."
Customers due a share in the compensation will be contacted by the company, including those who have moved address or whose bank account information has changed.
Some 65,000 will be given a cash refund, another 67,000 will have their current loan balance reduced and 15,000 will receive a combination of the two.
The DollarUK announced a string of redundancies and branch closures earlier in the year.
Source BBC, PA, CNS
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