Bookselling

Wonga’s Compensation Claims Quadruple | Wonga

The pile of compensation claims from customers against Wonga has quadrupled to more than 40,000 since the controversial payday lender collapsed, administrators said.

Wonga was placed in administration in August 2018, claiming that he could not financially cope with the more than 10,500 complaints registered with the Financial Ombudsman Service at the time.

There are more than four times as many customer bids that may have been mis-sold, after new complaints from claims handling companies, Administrator Grant Thornton said in a letter to the Treasury Select Committee on Tuesday.

Dave Dunckley, Managing Director of Grant Thornton, wrote that he expected the total number of complaints to increase further when he writes to all of Wonga’s customers to encourage them to claim if they think he is. it is about badly sold loans.

Dunckley said he was unable to provide details on the proportion of complaints accepted or the average amount successful applicants will receive. The administrators will publish a progress report at the end of March.

Grant Thornton intends to use an automated tool to decide complaints against Wonga, in order to avoid everyone’s manual processing costs – which would come out of the final compensation pot. The admin will launch an online portal for people to register their claims against Wonga once he completes various legal steps.

Administrators will be able to tell former Wonga customers if their claim has been successful relatively quickly, but the amount they will receive will not be decided “until all assets have been recovered,” Dunckley wrote.

Before its collapse, Wonga was the controversial flagship of the UK payday loan industry. The company, founded in 2007, has drawn the ire of regulators due to interest rates reaching as high as 5.853% per year offered to customers.

Regulators ultimately cracked down on the industry, introducing an affordability check requirement and opening the door to thousands of allegations it mis-sold loans, often to vulnerable clients.

Grant Thornton said he monitors potentially vulnerable clients and offers debt management advice.

The large number of complaints and Wonga’s lack of assets during bankruptcy mean claimants are likely to receive much less than they are entitled to.

“This problem is clearly much bigger than expected,” said Nicky Morgan, the Conservative MP who chairs the select Treasury committee.

Morgan said: “This question raises questions as to whether the coverage of the Financial Services Compensation Scheme should be expanded to protect customers of high-cost short-term lenders and those of companies that subsequently go bankrupt. “

Compensation claimants rank among unsecured creditors in the administration, which means bondholders will be paid before those that have been mis-sold.

In his shareholder proposal for administration in October, Grant Thornton said Wonga owed unsecured creditors £ 83.3million, including at least £ 45million for those owed compensation.

Dunckley warned clients to avoid using claims management companies, which he said take up to a third of any compensation in exchange for little work.