Member Article

Newcastle United sponsors Wonga ‘sorry’ after being told to pay back £2.6 million

Wonga has apologised to customers after being told it must fork out £2.6 million in compensation to customers for sending letters from made-up lawyers.

The payday lender - controversial sponsors of North-East Premier League football team Newcastle United - sent letters from non-existent law firms to customers in arrears.

The correspondence threatened legal action, but the legal businesses were false, and in some cases Wonga added fees for these letters to customers’ accounts.

The City watchdog, the Financial Conduct Authority (FCA), said 45,000 customers would be compensated.

Wonga, which claims the underhand tactic ended nearly four years ago, has apologised.

The company is the UK’s largest payday lender, making nearly four million loans to one million customers in 2012.

Wonga sent letters to customers from fake law firms called “Chainey, D’Amato & Shannon” and “Barker and Lowe Legal Recoveries”, an investigation found.

The report found that the letters were being sent between October 2008 and November 2010, and involved Wonga and other companies within its group.

The investigation was started by the FCA’s predecessor, the Office of Fair Trading (OFT).

Wonga said it stopped the tactic voluntarily then offered information to the OFT.

The FCA is unable to fine Wonga, due to it happening before the FCA took over the regulation of payday lenders, and it says there will be no criminal investigation.

“Wonga’s misconduct was very serious because it had the effect of exacerbating an already difficult situation for customers in arrears,” said Clive Adamson, director of supervision at the FCA.

“The FCA expects firms to pay particular attention to fair treatment of those who have difficulty in meeting their loan repayments.”

In addition, in April this year, Wonga discovered that it had miscalculated some customers’ balances.

This resulted in 200,000 people overpaying the company. Wonga said that the majority overpaid by less than £5, and a larger number underpaid.

Those who overpaid will be contacted by Wonga, and the underpaid debt will be cancelled.

Wonga says it will start contacting customers in July to offer compensation, with money likely to be paid by the end of the month.

This will either be paid in cash or customers will have their outstanding debt reduced.

The firm’s interim chief executive Tim Weller said: “We would like to apologise unreservedly to anyone affected by the historical debt collection activity and for any distress caused as a result.

“The practice was unacceptable and we voluntarily ceased it nearly four years ago.”

Anyone who might have changed address in the intervening period should contact Wonga.

The problems for Wonga come shortly after its boss Niall Wass quit after six months in the job of chief executive, while chairman and founder Errol Damelin announced earlier this year he was planning to quit.

This was posted in Bdaily's Members' News section by Martin Walker .