Wonga wrist rapped

Posted in 'Personal Finance' by Barry Stamp

24 May 2012

The Office of Fair Trading (OFT) has ordered payday loan lender Wonga to tone down the letters it sends to defaulted customers.

When chasing overdue debt, Wonga suggested that avoidance of debt may be an act of fraud, and that they would consider reporting the matter to the Police for action if the account was not brought up to date immediately. The OFT believes that Wonga did not have sufficient proof of fraud to make such an accusation and the threat was therefore unnecessary.

Wonga says in its defence that the letters in question were only sent to those debtors who ‘charged back’ payments made by credit card, and to those who had taken a payday loan and had then entered into a debt management plan. They believed that the borrowers entered into payday loans with no intention to repay, which, if true, would have been an act of fraud, but the OFT’s argument is that Wonga could not assume this in every case.

During its investigations, the OFT also discovered a call script used by Wonga collection staff telling those working in the public sector or in the financial sector that they were in breach of their terms of employment by taking loans out.

Wonga will now face a fine of up to £50,000 for every further instance of inappropriate debt collection practices.

David Fisher of the OFT says,"We have acted to ensure that Wonga does not behave this way again. I would like to make it clear to businesses that they must not adopt aggressive or misleading practices…..”

Wonga is to appeal the OFT ruling. A Wonga spokesperson says, "Although Wonga believes it had grounds for suspecting dishonest conduct by the specific customers to whom letters were sent, they were sent on isolated occasions more than 18 months ago and have not been sent since that time.”

Barry Stamp is a co-founder of checkmyfile and is a Fellow of the Institute of Credit Management. He can be contacted at barry.stamp@checkmyfile.com.