News Column

Wonga attracts high interest from City of London police

June 28, 2014

Hilary Osborne Rupert Jones

Payday loan firm Wonga faces the prospect of a damaging criminal investigation after the City of London police force said it was considering referring fake legal letters sent out by the lender to the national policing lead for fraud.

The controversial lender was fined pounds 2.6m this week for sending letters to struggling borrowers in the names of fabricated law firms - and in some cases charging an administration fee for their services.

Initially it seemed Wonga might escape a police investigation, but amid intense pressure for action - including from the head of the Law Society, Desmond Hudson, who said Wonga's "dishonest activity" could amount to blackmail and deception - the force said it is now reassessing the case for an investigation.

In a statement issued yesterday, it said: "Now the regulator's investigation has concluded, and a compensation agreement has been reached with Wonga, the City of London police will reassess whether a criminal investigation is now appropriate."

Wonga, which offers short-term loans at an annualised interest rate of 5,853%, sent letters to thousands of borrowers under the names of nonexistent law firms.

The letters were typically headed "Urgent message" and began: "We have been instructed by Wonga to recover from you a debt of pounds X . . ."

Hudson said: "It seems that the intention behind Wonga's dishonest activity was to make customers believe that their outstanding debt had been passed to a genuine law firm.

"It looks like they also wanted customers to believe that court action undertaken by a genuine law firm would follow if the debt was not repaid. Depending on the precise circumstances of what has happened, that could amount to blackmail and deception, as well as offences under the Solicitors Act 1974 and Legal Services Act 2007."

The Law Society said it had asked the Metropolitan police to investigate three offences: one of obtaining pecuniary advantage by deception and blackmail and separate offences under the Solicitors Act 1974 and the Legal Services Act 2007.

A spokesman for Wonga said it was focusing on compensating the 45,000 customers affected by a "historic" debt collection issue. He added: "We have been working over the past two years with two regulators - first the Office of Fair Trading and then the Financial Conduct Authority - and no one has been interviewed or contacted by the police in that time."

It emerged earlier this week that City of London police discussed the Wonga case with regulators a year ago but it was decided it should be left to regulators so the 45,000 consumers affected were not delayed in receiving their compensation.

Between October 2008 and November 2010 Wonga sent letters to customers in arrears under the names Chainey D'Amato & Shannon and Barker & Lowe Legal Recoveries. The use of the fake law firms was uncovered by the former consumer credit regulator, the OFT, in 2011, after Wonga was asked to disclose information about its debt collection practices.

Wonga customers sent the fake legal letters will receive a flat-rate pounds 50 settlement offer to reflect distress and inconvenience they have suffered. Some will also receive a refund of the charges incurred for being referred to Barker & Lowe or Chainey D'Amato - estimated at pounds 400,000.

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Source: Guardian (UK)

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