15Feb

Wonga avoids police investigation into fake letters

In June 2014, payday lender Wonga announced that it had reached agreement with the regulator, the Financial Conduct Authority (FCA), to compensate around 45,000 customers for the ‘distress and inconvenience’ caused by sending them debt collection letters which purported to come from law firms, firms which in fact did not exist. All affected customers would receive a £50 payment, with higher amounts being awarded in special circumstances.

It now seems that no further action will be taken against Wonga. It was suggested that the firm’s actions amounted to attempting to obtain money by deception, and other legal experts suggested they may be guilty of ‘impersonating a solicitor’, but in February 2015, City of London Police announced that they did not believe there was sufficient evidence against the firm to justify criminal charges. In its statement, the Police commented that most of the letters did contain a reference to Wonga in the small print at the foot of the page.

Wonga’s letters were sent between autumn 2008 and late 2010, and claimed to be from law firms such as ‘Chainey, D’Amato & Shannon’ and ‘Barker and Lowe Legal Recoveries’, when they were in fact from Wonga’s in-house debt collection team.

In mid-November 2014, the firm admitted that only just over half of the affected customers had received their compensation. Appearing before the House of Commons’ Treasury Select Committee (TSC), Wonga’s chief credit officer, Nick Brookes, said only 27,000 offers of compensation had so far been sent. Of the 5,000 who had already responded, 99% had accepted their offer. Mr Brookes suggested that many customers had changed their contact details and were proving difficult to trace.

Regarding the fact that less than 20% of those who had received the letters had replied, Joanna Elson, chief executive of financial charity the Money Advice Trust, suggested that many people were scared to open letters from Wonga, fearing that the communication may instead be another attempt to recover unpaid debts.

As of February 2015, it is understood that around three quarters of the compensation offer letters have now been sent.

High street banks Halifax and NatWest are amongst the other firms reported to have used similar tactics to try and recover debts. However, one crucial difference here is that the law firm names used in the banks’ letters were actually real subsidiaries of the banking group, whereas the firms Wonga’s letters referred to were fictitious.

Whilst no further action is likely to be taken against Wonga over this matter, payday lenders remain subject to intensive monitoring by the FCA. The FCA will also get to scrutinise all of the UK’s payday lenders in the near future when it considers their application to upgrade from limited permission to full permission. All such applications from payday lenders need to be submitted by the end of February 2015.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.