Wonga warned by OFT over debt collection
Filed under: Debt
So what was it up to, and what has the OFT done?
ThreatsWonga makes short term loans to customers at very high interest rates. It claims to be an easy way to get your hands on cash to tide you over to pay day. However, there are concerns that customers could be caught in a debt trap by the high cost of the loans, and that they could end up rolling them over - incurring impossible costs.
The OFT found that some of those who fell not this category and were struggling to repay loans (to the extent of setting up a debt management plan) were then subjected to poor practices by debt collectors. Other targets included borrowers who had claimed money back from Wonga by asking their card providers to reverse a payment made to the company.
The OFT has highlighted two letters and a call centre script. The letters suggested that the customer had committed fraud, and threatened to contact the police unless the borrower did as they were being told. They did not provide any justification as to why they made accusations of fraud. In the script, meanwhile, Wonga said that customers with jobs in the public or financial sectors should not find themselves in debt, and that this was stated in their terms of employment.
The OFTThe OFT immediately banned the approaches. It said Wonga must immediately stop alleging fraud without justification. It also said that Wonga had no right to state that a customer should not be in debt if they have a certain employment status or for any other reason.
David Fisher, OFT Director of Consumer Credit, said: "We have acted to ensure that Wonga does not behave this way again. I would like to make it clear to businesses that they must not adopt aggressive or misleading practices with their customers".
Wonga, meanwhile,released a statement saying that the requirement is unnecessary, and that it will be appealing the decision. It says it did have evidence in these cases that customers were being dishonest, that it sent out just a few of these letters, and that it stopped doing so 18 months ago.
It said: "Wonga has already demonstrated these were isolated incidents and there is no risk of it communicating with customers in a manner which might infringe the requirement."
Nevertheless, it is yet another worrying sign from an industry which is already under investigation by the OFT. It launched a major review in February and will report back later this year. If this news is anything to go by, there may be further horrors to unearth along the way.
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