Payday lender, Wonga, has always tried to distance itself from those it considers to be less ethical in the world of sub-prime lending. Indeed, Wonga’s founder Errol Damelin once said that critics of the payday lending industry were “picking on the wrong people”, and that Wonga “are the good guys”, claiming the firm provided “an important social service”. But the façade crumbled somewhat with the news that Wonga has been inventing fake law firms in order to chase non-paying customers.
Now, I’m sure most of us would agree that if a company agrees a price to provide a service, then they should be paid that price after they have provided the service. And therefore nobody disputes that if Wonga’s customers weren’t repaying their debts, Wonga were perfectly entitled to take debt recovery action.
However, it is one thing for Wonga to write letters demanding repayment, but another thing entirely for them to create law firms called Chainey D’Amato & Shannon and Barker & Lowe Legal Recoveries to do it on their behalf. The plan was simple – to make customers in arrears believe that their debts had been passed to a law firm, with the threat of imminent legal action if the debt wasn’t paid. The tactic was to improve recovery rates by piling the pressure on customers who were, in most cases, already struggling to pay essential household bills.
And then, to rub salt into the wounds, Wonga actually charged a number of their customers a fee for the privilege of receiving one of these letters.
Wonga claims that the practice ceased four years ago and, because the Financial Conduct Authority wasn’t around in 2010, the Authority is powerless to fine Wonga. The Authority also said that it was not looking to prosecute Wonga, and would rather accept Wonga’s proposal of paying £50 compensation to each affected customer (totalling over £2.5 million of compensation!).
That’s the same fee that you would pay Wonga for borrowing £200 for 3 weeks.
Is that enough?
There are those that will argue both ways, undoubtedly, but there is no doubt on whose side the Law Society is, after they announced that they had contacted both the legal regulator (the SRA) and the police authorities, and asked each of them to investigate the matter in more detail.
What is interesting, perhaps, is that the Law Society itself cannot take any action because Wonga’s letters had referred to law firms, rather than solicitors firms. The word “solicitor” is protected by law, and the unauthorised use of it would have been an offence. Nevertheless, the Law Society has asked the police to consider whether Wonga has committed blackmail and deception offences, or other offences under the regulatory framework that applies to the provision of legal services. Suffice to say, the Law Society isn’t happy with the Financial Conduct Authority’s decision, and we may well not have heard the last of this.
Mind you, if Wonga were going to make up the name of a law firm, they could have tried harder. One ‘wag’ on Twitter suggested that Dooey Screwem & Howe might have been more apt. I couldn’t possibly comment…
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.