Wonga to pay out compensation for dodgy debt collection practices
Investigation finds Wonga sent letters from non-existent law firms to pressure borrowers into paying.
Wonga, the nation’s biggest payday lender, has been ordered to shell out compensation of more than £2.6 million as a result of its “unfair and misleading” debt collection practices.
Wonga was found to have sent letters to borrowers in arrears posing as law firms named Chainey, D’Amato & Shannon and Barker and Lowe Legal Recoveries, threatening legal action. Neither of these firms even exist.
To make matters worse, in some instances Wonga was found to have added charges to borrowers’ accounts to cover the administration costs of sending these dodgy letters.
The financial regulator, the Financial Conduct Authority (FCA), determined that these practices piled pressure on borrowers to make loan repayments that many simply could not afford.
The compensation
Around 45,000 borrowers are now in line for a slice of the compensation pot of around £2.6 million.
A flat rate of £50 compensation, for distress and inconvenience, will be offered to everyone that received the letters, while £400,000 will be split between those who paid the charges for being referred by Wonga to the non-existent law firms.
In some cases additional compensation may be paid depending on individual circumstances.
Wonga will be contracting all affected borrowers directly. The FCA has appointed a "skilled person” to oversee the process and ensure they get what they are owed.
Why has it taken this long?
These practices – which took place between October 2008 and November 2010 – were apparently uncovered by the Office of Fair Trading (OFT) back in 2011.
The FCA only took over regulation for the consumer credit market (including areas such as payday loans) in April this year, so it has at least acted reasonably quickly on being passed the information. The FCA has explained that it cannot impose a fine on top of the compensation as the offences took place before its regulation of the sector had begun.
But why the OFT, which was closed down in April when its responsibilities were handed over to the FCA and the new Competition and Markets Authority, was unable to act on Wonga’s dodgy practices remains unclear.
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@jedi44 Your old mum says? If you are going to make an argument over the morality of sanctions against Wonga then please do it with some reasoning. My point is not based on morality, but on the basis that the legal matter is unclear. Demanding your own money back is not an offence, nor is adding admin. fees per the doubtless small print of an agreement. False representation to obtain a pecuniary advantage is the potential offence, but although the false representation has been admitted, what is the pecuniary advantage? Claimants would have to show some financial loss or additional stress, as otherwise merely being threatened by a solicitor, whether fake or genuine, would now have to constitute harassment, meaning that lawsuits which are proved to be frivolous or vexatious would certainly then have an added criminal element. I don't doubt that there would also be massive claims against the Inland Revenue for some of their strong-arm tactics.
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If Wonga get fined, shouldn't other too? Barclays use the name of Mercers Lloyds uses the name SCM Solicitors.
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To those who are saying to leave Wonga alone, everyone does it, I quote my old Mum. "2 blacks don't make a white". They should all be locked up.
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28 June 2014