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What to do if a customer or claiming compensation from Wonga payday loan company

Friday, 31st August 2018

The rumours in the media finally came to fruition as UK’s largest payday lender, Wonga went into administration yesterday, 30 August 2018. So, what does it all mean to you the customer? I’ll try and give you some answers below.

I have a loan with Wonga, can I stop paying it?

No. You still have to make the payments as previously agree with Wonga.

You can still communicate with Wonga if you experience difficulty in paying using the same contact details as before.

If you need more information on how to best manage your debts then look at our list of the 'not for profit and free' free debt help / advice agencies, they will not charge you fees for debt options.

Ok, what happens if Wonga sell my loan to another payday lender, can I stop paying it?

No, the same above applies.

I’m currently claiming compensation from Wonga; will I get my money?

It is not guaranteed, if fact you might not receive anything. It all depends on how much money can be raised by the administrators. These are the people that are now running the payday lender. My advice would be to still continue with the claim in case there is some money left after paying the administrators fees, secured creditors and then staff. Unfortunately claims against Wonga rack in the third tier of creditors, basically unsecured.

If for example the administrators say there is enough money to pay 10% of all claims then you would receive £50 on a £500 claim.

Is Wonga isn’t covered by the FSCS?

The Financial Services Compensation Scheme (FSCS) is the UK's compensation fund of last resort for customers of authorised financial services firms. They pay compensation if a firm is unable, or likely to be unable, to pay claims against it. This is usually because it has stopped trading or has been declared in default. For example if your bank fails the money you have in a current or savings account is protected up to £85,000.

Compensation on affordability claims against Wonga are not covered by the FSCS.

Payment Protection Insurance (PPI) claims might still be covered though as they have been with other loan companies that have ceased trading.

What caused Wonga’s problems?

In 2014, the Financial Conduct Authority (FCA) ordered Wonga to pay £2.6m to compensate 45,000 customers after it found their debt collection practices were unfair.

The regulator also ordered that all payday loans were to be capped at 100%, this means that if you borrow £400 the amount you have to pay back will never be more than £800. The capping resulted to a downturn in profit for the lender. The FCA then said that Wonga, along with other payday lenders, have to compensated previous customers if it was found the customer could not have afforded the loan when it it was initially taken out. With multiple claims coming in from customers and claims management companies, Wonga reached the stage whereby they could not service all those claims.

How long can Wonga stay in administration?

This is for a maximum period of 12 months, during which time the lender has to either enter into a creditors Voluntary Liquidation, (CVL) or Company Voluntary Arrangement (CVA) or the business is sold with new owners. The average duration for an administration order is six weeks.

Important information if you have an existing loan

There is more information on what to do if you have a Wonga loan or if you experience difficulties in making payments on the Wonga website, this link will take to straight there (external link to Wonga website) https://www.wonga.com/

Mike Thomas, aka DebtWizard, in the media - Wonga payday lender, what customers can and cannot do.

Listen - BBC Essex Drivetime with Dave Monk, 6.05pm 30/8/18.

Mike Thomas was in the studio with Dave Monk just after 6pm offering help to those customers caught up in the Wonga Payday loan demise. Mike explained why Wonga are in trouble and what their customers can do if they already have loans as well as what chances they have of receiving any compensation on claims now that Wonga have gone into administration.

Mike then offers alternatives to payday loans illustrating the huge difference in cost when compared to a credit union. Mike closes going through the problems with credit card debt when people only make minimum payments and shows how a simple debt of £2,600 on a credit card can take up to 25 years and 7 months to repay.

How to listen

Now on the BBC i Player. Move the timer to 2:08:55 - 2:17:14 (8mins 19 secs) Listen - BBC Essex Drivetime with Dave Monk, 6.05pm 30/8/18 (for 29 days)

 

 

 

 

 

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