Wonga – are you due compensation?

The payday lender is reported to be on the brink of collapse after being hit by an influx of complaints relating to historical loans – here’s all you need to know.

Payday lender Wonga is reportedly on the brink of collapse after a surge in complaints and payouts over historical loans.

It comes just weeks after shareholders pumped £10 million in a bid to save the payday business from going bust.

Wonga has faced criticism over the high interest rates it charges on loans over the past few years, with the Company being accused of targeting those who are especially vulnerable.

The problem with payday lenders

Payday lenders have long been controversial over the methods they use to promote, hand out and recoup unsecured loans which are typically designed to be repaid on person’s next payday. The problem is that interest rates are often so high that the borrower is unable to keep up with repayments.

Earlier this year, a report by a comparison website identified NHS staff, council officials and gig economy workers among the most regular applicants for emergency payday loans. In the UK, around 300,000 people a month take out high-cost short-term credit.

Last year, The Money Advice Trust told a parliamentary inquiry into payday loans that “when young people reach 16 to 24 and are thinking about borrowing, they are more likely to go for high-cost credit than the mainstream alternatives”, purely because the marketing was so “slick” and the online experience so easy.

Sarah-Jayne Clifton, director of the Jubilee Debt Campaign, said the figures showed “we need the government to take urgent action, not only to rein in rip-off lenders, but also to tackle the cost of living crisis and cuts to social protection that are driving people towards the loan sharks in the first place.”

Surge in complaints

Earlier this month, Wonga said its struggles were due to a “significant” increase industry-wide in people making claims in relation to historic loans dating 2014.

The lender blamed claims management companies for the rise, but said it was making progress against a transformation plan set out for the business.

Wonga said the number of complaints related to UK loans taken out before 2014 had “accelerated further”.

In 2014, the firm introduced a new management team and wrote off £220 million-worth of debt belonging to 330,000 customers after admitting offering loans to people who could not afford to repay them.

The Financial Conduct Authority (FCA) said Wonga had not taken adequate steps to assess customers’ ability to meet repayments in a sustainable manner.

It put forward interest waivers and the lender was forced to write off debts for thousands as a result of talks with the regulator. In recent months, Wonga said it’s seen an unanticipated rise in these complaints coming forward.

Wonga complaints – how to check if you’ve been mistreated

In 2015 the FCA introduced stricter rules on payday lending to help regulate the market, making it fairer for borrowers.

It introduced a 0.8% price cap on high cost short-term credit (HCSTC), limits on how many times a payday loan could roll over and stronger guidance on affordability checks and financial health warnings.

Someone taking out a loan for 30 days will pay no more than £24 in fees and charges per £100 borrowed, and if you don’t repay on time, the most you can be charged in default fees is £15 plus interest on the amount you borrowed.

An overall cap means that you will never pay back more than twice what you initially borrowed.

Firms are also required to conduct comprehensive affordability checks on all borrowers to ensure they can afford the loan.

This is in line with underlying FCA guidelines that state all firms must be able to show that fair treatment of customers is at the heart of their business model.

How to make a complaint

Payday loan lenders are supposed to check that you are able to pay back the loan before lending to you, but sometimes they don’t follow the rules. If a payday lender breaches these guidelines, you can make a complaint.

To open a dispute, contact your lender and try to sort things out with them. Here’s how to get in touch with Wonga (or call 0207 138 8330).

You’ll need to find the addresses where you were living when you took the loans out to hand as well as your account details. You’ll also need details on names on the account along with dates and timelines. Think back to the applications process – how easy was it/did they offer more cash than you needed?

Explain in as much detail as possible what rules you believe have been broken, why and the impact it’s had on you. Be as clear as possible but try not to delve too much into the emotional aspect – keep it succinct. Take photocopies of any evidence and send this with your complaint.

It may also be worth contacting your local Citizens Advice for help and advice as well.

They then have five days to acknowledge your concerns and eight weeks to try and resolve it for you.

If after two months you’ve had no luck on an outcome (or you remain unsatisfied) you can escalate it to the Financial Ombudsman. They will then put forward suggestions of how the case can be solved or open a formal investigation. A resolution must be given within six months of receiving a response from the lender.

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