Why isn’t Wonga in the dock?
Fury at payday lender over bogus legal letters used to bully debtors
CONSUMER groups and an MP are demanding a police inquiry into Wonga after evidence emerged it sent bullying letters from fake law firms to threaten customers who were behind on repayments.
Britain’s biggest payday lender was yesterday named and shamed by a City watchdog, which ordered it to pay more than £2.6million in compensation to 45,000 customers who received the bogus letters.
But consumer groups say there is clear evidence of a criminal deception and insist the police should be brought in.
Shadow consumer affairs minister Stella Creasy called for a police investigation of Wonga, saying: ‘Aside from potential fraud, harassment of a debtor is a criminal offence.’
The MP pointed out that it is also an offence to pretend to be a lawyer under the 1974 Solicitors Act.
She added: ‘News that Wonga was sending fake solicitor letters to cash-strapped customers who couldn’t afford their fees to frighten them – and charging them for these – is further proof of the need for Britain to rid itself of these legal loan sharks.’
While the company presents itself as the ethical face of the payday loans industry, with its friendly TV ad puppets, an investigation by the Financial Conduct
‘Inventing lawyers and making demands’
Authority ( FCA) f ound extensive evidence of ‘thuggish’ behaviour.
Among Wonga’s victims threatened by the fake legal team was a woman who missed repayments because she was in hospital recovering from a miscarriage.
The FCA said Wonga sent letters to customers in arrears from what appeared to be two law firms, called ‘Chainey, D’Amato & Shannon’ and ‘Barker and Lowe Legal Recoveries’ – but these two companies were invented by Wonga to put pressure on customers.
In some cases, extra charges were added to the outstanding debt to cover the cost of sending these threatening letters.
Despite the damning evidence, the watchdog added that £2.6million was the biggest compensation order it could impose on Wonga – because the wrongdoing occurred before tougher laws were implemented last year.
Consumer Action Group founder Marc Gander said: ‘It seems to me that this was a criminal deception. Wonga was inventing lawyers and making demands for charges. I am amazed that there is no substantial fine or criminal investigation.
‘I don’t think the FCA needs to look very far to find evidence of laws that have been broken. The real problem is that they do not seem to have the will or the courage.’
Clive Adamson, director of supervision at the FCA, said: ‘ Wonga’s misconduct was very serious because it had the effect of exacerbating an already difficult situation for customers in arrears. The FCA expects firms to pay particular attention to fair treatment of those who have difficulty in meeting their loan repayments.’
The £2.6million of redress covers a flat compensation payout of £50 for each of the 45,000 customers who were targeted between 2008 and 2010. Some will also get refunds of charges that were unfairly applied.
But this represents a tiny figure in the context of the company’s profits, which are estimated at more than £100million a year on the back of making more than four million loans a year to more than one million customers.
One of the company’s two founders, Errol Damelin, who was chief executive at the time the threatening letters were being sent, stepped down from his post as chairman only two weeks ago in what appears to have been a damage limitation exercise.
Mr Damelin and Jonty Hurwitz set up what is now Britain’s biggest payday loan company in 2007 and within two years had raised £14million from City investors.
Today, the two enjoy luxury homes and lifestyles, with Mr Damelin’s personal fortune estimated at more than £34million, while Mr Hurwitz is said to be worth £25million.
Their wealth has been built on the back of families who have struggled for cash during a six-year cost-ofliving squeeze, during which time the firm has also attracted many critics. Of the present controversy, Martin Lewis, founder of MoneySavingExpert.com, said: ‘This just shows that while Wonga hires expensive marketing, PR and public affairs consultants to try to position itself as the good guys in a bad industry, it’s all a sham.
‘Using lawyers as fake as its puppets, then having the stomach to charge people for it is a thuggish tactic, aimed at scaring and intimidating people already struggling.’
The firm’s interim chief executive, Tim Weller, 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.’