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FCA refers Wonga case to police – reports

The FCA has referred its case against payday lender Wonga to the police, according to reports.

Wonga will pay around 45,000 customers £2.6m in compensation after an FCA investigation uncovered “unfair and misleading” debt collection practices, including sending letters from non-existent law firms.

In certain cases, Wonga had added charges to customer accounts to cover administration costs for sending the erroneous letters.

According to an ITV report, the regulator has now asked the police to assess whether criminal proceedings should continue because it is illegal to impersonate a solicitor.

The FCA, which assumed authority over consumer credit on 1 April, refused to confirm or deny that it had referred the case to the police.

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. Ex Broker Consultant 26th June 2014 at 9:51 am

    Ooo I do hope so, even though I don’t see anything wrong with payday loan companies per say other than morally. Breaking the law however I do!

  2. Surely the FCA should also be taking action regading the current/interim Consumer Credit Licence held by Wonga.

  3. Well, that’s a start ~ though why is the FCA refusing to confirm or deny a story that’s already in the national media?

  4. Inside Observer 26th June 2014 at 4:03 pm

    £2,600,000 divided between 45,000 clients, that’s an average of £57 each and based on Wonga interest rates I would guess that they have made money than that in the time it has taken me to write this post!!!

  5. Julian Stevens 26th June 2014 at 4:58 pm

    By whom and what method was this figure of £2.6m arrived at? £57.77 per customer seems so trivial as to be hardly worth messing about with, especially in view of Wonga’s latest profits of £84.5m. I appreciate that the FCA’s scope for imposing a fine is blocked by the fact that neither it nor the FSA was responsible for regulating these sharks at the time the offences were committed but, if it’s going to impose a restitution order, you’d think they’d come up with something more meaningful than just £57.77 per customer, many of whom must surely have experienced severe anxiety upon receiving a threatening letter from a firm of solicitors (which, at the time, they wouldn’t have known was bogus). Even £26m probably isn’t adequate. The FCA works in mysterious ways, its wonders to perform.

  6. Ex Broker Consultant 26th June 2014 at 5:28 pm

    @Julian not every one of Wonga’s clients would even be close to be getting the money as only very very few get into trouble, and only some of those would have gotten threatening letters.

    The default rates will be higher than standard bank loans but not 100%

    Most people pay after all.

  7. Julian Stevens 27th June 2014 at 9:11 am

    To Ex-BC ~ The article says “Wonga will pay around 45,000 customers £2.6m in compensation” and the ITV report says “In some cases they [Wonga] levied administration fees of up to £400,000”. Those data suggest pretty clearly that a mere £2.6m isn’t going to go very far in terms of putting things right.

  8. Ex Broker Consultant 27th June 2014 at 10:03 am

    I withdraw my idiocy. Obviously reading comprehension broke yesterday!

  9. One would hope that the FCA draws up a robust code of conduct for these outfits, principally that they (like the rest of us) must be clear, fair and not misleading in their promotions and that they’ll have to provide prospective borrowers with illustrations showing exactly how much they’ll be liable to pay after 2 weeks, 1 month, 2 months and so on.

    Borrowers would have to tick a box confirming that they’ve both read and understand the figures in the illustration and another to confirm that they expect they’ll be able to afford these sums. In fact, the FCA might well mandate a checklist of questions to determine affordability. After all, you can’t get a secured loan (mortgage) if you can’t evidence affordability so why should it be any different for unsecured loans?

    Lending money to people who may well very well experience difficulties repaying it (plus the extortionate interest) is, from the point of view consumers’ wellbeing, surely a high risk activity.

    Many people borrowing money on such usurious terms are very probably so desperate and vulnerable that they simply don’t think clearly about what they’re taking on. All they’re thinking about is getting hold of the money today.

    Lenders should also be required to provide a very clear statement of practice for the recovery of unrepaid loans.

    I also think the rates of interest they’re allowed to charge should be limited to, say, no more than twice the average rate charged by 10 leading credit card providers.

    And, as I’ve suggested several times before:-

    1. unsecured lending from all sources, in aggregate, should be capped at 3 times nett monthly income and

    2. all credit purchases should limited to 90%, maybe even 80%, of the purchase price

    Not having in cash even 10% of the price of what you want to buy must surely raise some pretty serious questions as to whether you should be trying to buy it at all. Personal debt levels in the UK are at an astronomic all time high. Surely the regulator (which is part of the government) has a social and moral responsibility to take steps to tackle this?

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