“SHOCKING NEW LOW FOR THE PAYDAY LOAN INDUSTRY?”

pound_coins_stackedup_resizedWonga, the UK’s largest payday loan company, has been ordered to pay £2.6m in compensation, after sending letters from non-existent law firms to customers in arrears.

The letters threatened legal action, but the law firms were false. In some cases Wonga added fees for the letters to customers’ accounts, according to the BBC.

The customers affected (45,000 of them) will each receive £50 for distress (a piddling amount, surely?) plus any legal fees they have encountered. The regulator in this case is the Financial Conduct Authority (FCA); they cannot however fine Wonga because the offences happened before they started regulating payday loans companies.

Richard Lloyd, executive director of consumer group Which?, said: “It is right the FCA is taking a tougher line on irresponsible lending and it does not get much more irresponsible than this.

“It is a shocking new low for the payday industry that is already dogged by bad practice and Wonga deserves to have the book thrown at it.”

Tougher line? £50 each? I imagine the people at Wonga are laughing.

Wonga is not the only lender to do this. Back in my debt-crisis days, I received a letter from a non-existent firm of solicitors. I was only alerted to the fact when I noticed that the initials of the firm were identical to those of the bank that was chasing me for the debt. It’s sharp practice and could cause considerable distress, because most people have a healthy respect for the law. And that’s how it should be. So to use that fact in this way is pretty despicable. £50 each, eh?

There is an existing Code of Practice from the Office of Fair Trading (OFT) regarding harassment of debtors, although it is often ignored. I’ve blogged about it more than once; for details click HERE.

 

WANT TO KNOW MORE?

For the BBC News item, click HERE.

For the OFT Code of Practice regarding harassment of debtors, click HERE.

 

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