Wonga forced to pay compensation
Payday loan company, Wonga, has been ordered to pay more than £2.6m compensation after sending threatening letters to customers from fake law firms.
The company created fake law firms which threatened legal action over outstanding debts.
The Financial Conduct Authority (FCA) said Wonga had been guilty of "unfair and misleading debt collection practices" and would be compensating around 45,000 customers.
Wonga also added charges to customers' accounts to cover the administration fees associated with sending the letters.
According to he Guardian the firm escaped a financial penalty because the FCA only started policing payday lenders in April 2014, and these practices occurred while the now-defunct Office of Fair Trading (OFT) was in charge.
Between October 2008 and November 2010, Wonga sent letters to customers in arrears under the names Chainey D'Amato & Shannon and Barker & Lowe Legal Recoveries – leading customers to believe that their outstanding debt had been passed to a law firm or another third party. Legal action was threatened if the debt was not repaid. The communications were typically headed up "Urgent message" and began: "We have been instructed by Wonga to recover from you a debt of £X ..."
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. We are pleased Wonga has been working with us to put matters right for its customers and ensure these historical practices are truly a thing of the past."
Martin Lewis, founder of consumer website MoneySavingExpert.com, said he welcomed the action being taken, adding: "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 who are already struggling."
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