POLITICS

Wonga Faces Police Probe Over Fake Legal Threats To Debtors

26/06/2014 16:32 BST | Updated 27/06/2014 16:59 BST

Wonga could face a criminal investigation after it emerged that the payday loans giant had sent "thuggish" legal letters from fake law firms to threaten customers behind on repaying their loans, and charged them for the letters.

City of London Police have confirmed they are to look again at whether they think a criminal investigation into Britain's biggest payday lender would be appropriate after the firm agreed to pay out £2.6 million in compensation to 45,000 customers who had received the bogus letters after being named and shamed by the Financial Conduct Authority (FCA) watchdog.

Police and FCA regulators will meet next week to decide whether to investigate Wonga, as critics have argued that there is clear evidence to justify such a probe into the lender's controversial activities, which took place between 2008 and 2010.

The Law Society, which represents around 160,000 solicitors across England and Wales, said it asked the police to investigate Wonga and consider whether any offences, such as blackmail or those under the Solicitors Act, have been committed.

Law Society chief executive Desmond 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."

Wonga, which made £62.5 million in profit last year, had sent letters to customers behind on their repayments from two fake law firms, called ‘Chainey, D’Amato & Shannon’ and ‘Barker and Lowe Legal Recoveries’, to put pressure on their customers, the FCA said.

One of the victims threatened by Wonga was a woman who was in arrears because she was in hospital recovering from a miscarriage. In some cases, the payday loans giant added the cost of sending the fake legal threats to the outstanding debt.

Shadow consumer affairs minister Stella Creasy called for a police investigation saying: "Aside from potential fraud, harassment of a debtor is a criminal offence."

Labour MP Adrian Bailey, chairman of the Commons business committee, told the Huffington Post UK: "This investigation has exposed the family friendly advertising campaign of Wonga as a complete sham. They demonstrate a horrifying level of intimidation of some of the most vulnerable in our society.

Wonga has so far escaped having to pay out more because the wrongdoing took place before tougher regulation of the payday loans sector came into place last year.

Consumer Action Group founder Marc Gander said: "It seems to me that this was a criminal deception. Wonga was inventing lawyers and making demands for charges. I am amazed that there is no substantial fine or criminal investigation.

"I don’t think the FCA needs to look very far to find evidence of laws that have been broken, the real problem is that they do not seem to have the will or the courage."

Wonga, which is a financial supporter of the Conservatives, also admitted that their miscalculation of charges meant just under 200,000 customers overpaid the company, although the majority of them were by less than £5.

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

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

Martin Lewis, founder of MoneySavingExpert.com joined in the attack: "This just shows that while Wonga hires expensive marketing, PR and public affairs consultants to try to position itself as the good guys in a bad industry, it’s all a sham.

"Using lawyers as fake as its puppets, then having the stomach to charge people for it is a thuggish tactic, aimed at scaring and intimidating people already struggling."

In response to the £2.6 million payout, Wonga'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."