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.



For the BBC News item, click HERE.

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



Last month I wrote about so-called “pension liberation plans”, which are a very tempting way to release funds below the age of 55 but in many cases turn out unwise. Today’s “Sunday Times” urges that they should be banned by a new financial watchdog that will launch tomorrow.

According to the paper, the new Financial Conduct Authority (FCA) replaces the much-criticised Financial Services Authority (FSA), “which failed to prevent scandals involving payment protection insurance (PPI), endowment policies and split-capital* investment trusts.” The new body promises to act fast and ban poor products overnight, which is to be applauded.

As for these pension liberation plans, which have grown rapidly; they promise to release funds from your pension before the age of 55, when it’s normally available, by transferring the funds into another scheme, often offshore. However the fees can be eye-watering and they can attract extra tax penalties of up to 70%.

[* I admit that when I read the article I was worried about the mention of split-cap investment trusts. Over the past year I have become a fan of investment trusts or “ITs”; I hadn’t heard of this particular scandal and I wondered if I had invested unwisely. Turns out I needn’t have worried; the scandal appears to have been unveiled, and cleared up, nearly ten years ago; and it concerned a specific type of fixed-term investment trust.]