Payday loans company Wonga, which has been criticised for the high interest rates it charges customers, has been told by the Office of Fair Trading (OFT) that its debt collection practices breach regulations. The OFT published its criticism after seeing letters telling some customers that they may have committed fraud and that Wonga would turn them into the police if the customer did not act as requested.
In response to the findings, the OFT has imposed a requirement on Wonga that it does not: ‘allege that a customer has, or may have, engaged in criminal conduct or refer to the consequences of such conduct; state that a customer should not be in debt if the customer has a certain employment status or for any other reason.’ Wonga has disputed the criticism, saying that the misleading behaviour was isolated and happened more than 18 months ago.
But in an effort to prove that its bark is not bigger than its bite, the OFT said that if Wonga continued using such practices, it would fine the lender £50,000 for every future breach of the rules. David Fisher, the OFT’s 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 boss Errol Damelin may not be too worried by the size of the potential fine, but he will certainly be hot under the collar about the bad publicity...
Wonga has come under public and media scrutiny for interest rates of 4,214% APR, and the fact that it is soon to open a business lending arm which will offer companies a facility of up to £10,000 for up to 12 months. The OFT launched a review of the so-called payday lending industry back in February, and will announce its findings later on this year. Wonga will be hoping to avoid any further gaffes or run-ins with the authorities in the meantime.