The UK’s biggest payday lender Wonga is to pay more than £2.6 million of compensation for using ‘unfair and misleading debt collection practices’.
The payouts, agreed in a deal with the Financial Conduct Authority (FCA), will see around 45,000 customers receive duress.
An investigation into the firm, which was started by the Office of Fair Trading (OFT) and taken on by the FCA, found the lender sent letters to customers in arrears from made up law firms, threatening legal action between October 2008 and November 2010. In some cases it even added admin fees to customers’ accounts to cover the cost of the letters.
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.
‘We are pleased that Wonga has been working with us to put matters right for its customers and to ensure that these historical practices are truly a thing of the past.
‘The FCA expects firms to pay particular attention to fair treatment of those who have difficulty in meeting their loan repayments.’
The FCA said it had appointed a ‘skilled person’ to oversee the process and ensure all customers affected receive redress.