Wonga ordered to pay £2.6m compensation after using fake law firms to chase debts

Reposted from the Indepedndent

I’m glad that the Financial Conduct Authority (FCA) have finally grown a pair and are sorting out these payday loan companies.

As far as I am concerned, Wonga, along with many other payday loan companies are barely legal

http://www.benefitsandwork.co.uk/news/latest-news/1032-incapacity-claimants-offered-1355-apr-loans

These firms play on the fact, that most people who take out these type of loans are not aware of their legal rights, the main one being :-

http://www.legislation.gov.uk/ukdsi/2008/9780110811574/contents

If you ever receive a so called debt collection/recovery letter purporting to be from a solicitor or firm of solicitors, then visit the Solicitors Regulatory Authority (SRA) where you can check if the solicitor/firm is genuine.

http://www.sra.org.uk/consumers/solicitor-check.page

 

The UK’s biggest payday lender Wonga has been ordered to pay more than £2.6 million in compensation after it was found to have chased customers’ debts using letters from fake law firms.

As part of a series of “unfair and misleading debt collection practices”, the company pretended to be writing from non-existent law firms when it threatened people who were in arrears with legal action.

Wonga even added extra charges to some customers’ accounts to cover its own administration costs for sending the letters.

The findings come from an investigation by the Financial Conduct Authority (FCA), which accused Wonga of “exacerbating an already difficult situation” for customers struggling with their debts.

It said consumers were put under “great pressure” by the threats from fake firms to make loan repayments that they could often not afford.

Wonga contacted customers in arrears under the names of two pretend companies, Chainey, D’Amato & Shannon and Barker and Lowe Legal Recoveries, leading customers to believe that their outstanding debt had been passed to a law firm, or other third party. Further legal action was threatened if the debt was not repaid.

The company has apologised for the practice, which took place between October 2008 and November 2010. It will be made to repay around £400,000 for the “referral” charges it levied on customers, and a further £50 payment each to the 45,000 people who were sent letters for the “distress and inconvenience” caused.

Tim Weller, interim Wonga CEO, said: “We would like to apologise unreservedly to anyone affected by the historical debt collection activity and for any distress caused as a result.

“The practice was unacceptable and we voluntarily ceased it nearly four years ago.”

The FCA said that its agreement with Wonga meant the lender will actively track down and contact all those affected. Some will receive cash while it is likely others will have their outstanding balance reduced, the watchdog said.

It will oversee the process to ensure people receive the money they are owed, and indicated that depending on individual circumstances there may be additional compensation payments made.

As part of its preparations for the FCA regulation, Wonga said it had also discovered technical errors which meant just under 200,000 customers had overpaid the company.

It said it was contacting these customers to offer compensation, adding that the majority overpaid by less than £5.

Summarising both blunders, Mr Weller said: “We will learn from these mistakes and continue working with the FCA to build a better Wonga for the benefit of our customers. We’re strengthening our internal controls and systems and now have almost 1,000 people around the world, who are working hard to serve the demand for short-term credit in the most responsible way possible.”

In 2012 alone, Wonga made nearly four million loans to more than one million customers. The entire payday loans industry has been referred by the Office of Fair Trading for a full-scale probe of its “deep-rooted” problems, and the full findings of that investigation are due to be published later this year.

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2 Responses to Wonga ordered to pay £2.6m compensation after using fake law firms to chase debts

  1. sdbast says:

    Reblogged this on sdbast.

    Like

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