Thousands of Wonga customers who may have been mis-sold expensive pay day loans could be deprived thousands of pounds in compensation after falling through the cracks, MPs have said.
The Independent says “many of the complaints stem from 2014 rules which tightened affordability criteria that payday lenders have to apply to prospective borrowers”.
Article continues belowThe Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
However, a 2016 decision by the Financial Conduct Authority (FCA) to exclude high-cost short-term credit firms from the Financial Services Compensation Scheme (FSCS) means Wonga’s customers are not entitled to compensation.
Sky News says it has left thousands in “financial limbo” and “means borrowers have no option other than to become one of a long list of creditors owed money by the firm with no guarantee of getting their money back”, says The Sun.
Sara Williams, who runs the Debt Camel blog and is an debt adviser at charity Citizens Advice, says compensation payouts from Wonga have typically been between £500 and £1,000, with some getting a lot more. The FSCS protects cash up to £85,000 as long as it is saved with a financial institution.
The row has prompted a furious war of words between the Nicky Morgan, chair of the House of Commons Treasury Committee, the head of the Financial Conduct Authority (FCA), Andrew Baily, and Wonga’s administrators.
Claiming the customers, many of whom are financially vulnerable, had “been allowed to fall through the cracks with nobody taking responsibility for their mistreatment”, Morgan said “these people have been left to fend for themselves by Wonga, the FCA and the FOS.”
Arguing their finances continued to be “damaged from beyond the grave” with no regulatory authority taking responsibility to deal with the complaints, Morgan has asked Wonga's administrators for more detail on how outstanding complaints against the payday lender could be progressed – and even opened up the possibility of government intervention.