Tagged: FCA

Northumbrian Water among suppliers accused of Wonga tactics after sending out debt collection letters

A North East water supplier has stopped issuing “frightening” debt collection letters after its tactics were likened to controversial pay day loan company Wonga.

Northumbrian Water was found to be among half of UK suppliers sending correspondence which appears to be from an external debt agency, but is actually from the water company itself.

The news follows June’s ruling by the Financial Conduct Authority (FCA) that 45,000 Wonga customers must be compensated after being sent letters from nonexistent law firm threatening legal action, while similar practices were also highlighted among banks and energy firms.

Northumbrian Water, which stopped the policy earlier this year, used the name Alexander James in large print at the top of the letters, but say it was clearly linked to the company.

In total, 12 of the UK’s largest water suppliers have been found to have taken part in the practice – which water watchdog Ofwat has written to companies with concerns over – while five are still doing it.

Shona Alexander is chief executive of Newcastle Citizens Advice Bureau, which offers free debt advice.

She said:

It is good news Northumbrian Water has stopped using this letterhead and it is disappointing to hear some companies are still using it.

“It is bad practice. By saying Alexander James at the top it looks to the client as a debt collector and that is frightening. Then at the very bottom in small print it says this is part of Northumbrian Water.

“At best it is unfair and causes distress, and at worst it is deliberately misleading.”

A Northumbrian Water spokeswoman said:

“The Alexander James brand was used to encourage customers who were not paying their bill to contact us to talk about a payment plan and to receive debt advice. It was very clear that Alexander James was part of Northumbrian Water Limited.

“We took the precautionary decision to suspend using the brand name the day after the Wonga story broke. After researching why the FCA took action against Wonga, we believe we have complied with best practise as the brand name was registered with relevant financial agencies to ensure transparency and our consumer watchdog, the Consumer Council for Water, was also fully aware we were using this brand name.

“After a review we have now decided that we will not be using the Alexander James brand in the future although our use of it was transparent and compliant.”

Source –  Newcastle Evening Chronicle,  16 Oct 2014

Wonga writes off 330,000-customer debts

Wonga is to write off the debts of 330,000 customers after it admitted it has made loans to people who could not afford to repay them.

The move by the pay-day lender comes after an agreement with the Financial Conduct Authority (FCA) that requires it to make significant changes to its business immediately.

The review means that about 330,000 customers who are currently in excess of 30 days in arrears will have the balance of their loan written off and will owe Wonga nothing.

Approximately 45,000 customers who are up to 29 days in arrears will be asked to repay their debt without interest and charges and will be given an option of paying off their debt over an extended period of four months.

Wonga’s new chairman Andy Haste said: “We want to ensure we only lend to those who can reasonably afford the loan in question and during my review, it became clear to me that this has unfortunately not always been the case.

“I agreed with the concerns expressed by the FCA and as a consequence of our discussions we have committed to taking these actions.”

Source –  Northern Echo,  02 Oct 2014

Calls for criminal investigation of Wonga after claims of misleading debt collection practices

Calls have been made for a criminal investigation of Wonga after claims of misleading debt collection practices.

Newcastle United sponsor Wonga was ordered pay more than £2.6 million in compensation to around 45,000 customers for “unfair and misleading debt collection practices”, the City regulator announced this week.

Now the Law Society has asked the Metropolitan Police to investigate Wonga in the wake of the controversy.

The Society has also called on the Financial Conduct Authority to hand over copies of its investigation and the Solicitors Regulation Authority to examine whether an offence has been committed under the Legal Services Act 2007.

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.

“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.”

Wonga, which struck a controversial four-year sponsorship deal with Newcastle United in October 2012, apologised “unreservedly” for the failings, which took place between October 2008 and November 2010.

Tim Weller, interim Wonga CEO, 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.”

Source –  Newcastle Evening Chronicle, 27 June 2014

Wonga to pay more than £2.6m in compensation to customers

Newcastle United sponsor Wonga is to pay more than £2.6 million in compensation to around 45,000 customers for “unfair and misleading debt collection practices”, the City regulator has announced.

The UK’s biggest payday lender was found to have sent letters to customers in arrears from non-existent law firms threatening legal action, the Financial Conduct Authority (FCA) said.

In some cases Wonga added charges to customers’ accounts to cover administration fees for sending the letters.

Wonga, which struck a controversial four-year sponsorship deal with Newcastle United in October 2012, apologised “unreservedly” for the failings, which took place between October 2008 and November 2010.

The FCA said consumers were put under “great pressure” from communications sent by fictitious law firms to make loan repayments that many could not afford.

Wonga contacted customers in arrears under the names Chainey, D’Amato & Shannon and Barker and Lowe Legal Recoveries, leading customers to believe that their outstanding debt had been passed to a law firm, or other third party. Further legal action was threatened if the debt was not repaid.

Neither of these firms existed and Wonga was using this tactic to maximise collections by piling the pressure on customers, the regulator said.

Tim Weller, interim Wonga CEO, 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.”

Source – Newcastle Evening Chronicle,  25 June 2014

Beware of the loan sharks

Payday loan sharks have trapped an increasing number of Brits into unmanageable debts and new research has revealed that this problem is increasingly getting worse.

In fact, a new report from the charity StepChange showed that the number of people seeking relief from payday lenders has shot up by 82 per cent.

Worryingly most of those vulnerable people seeking help had racked up thousands of pounds worth of debt after taking out more than one loan.

According to StepChange, people seeking advice in 2013 held an average of three payday loans, but at least 13,800 had five or more. The average debt was £1,647, significantly more than the average person’s monthly income of £1,381.

Many people make the mistake of taking out a payday loan believing that it is “easy money”.

However, payday loan companies are little more than legalised loan sharks that prey on vulnerable and low-income people and trap them into a cycle of debt that they cannot get rid of.

Many firms such as Wonga charge annual percentage rates (APR) of 4214%. To put it in layman’s terms and get an idea of just how quickly debt can balloon out of control, if you took out a loan of £3000 at 20 per cent APR (way below the average) and made the minimum repayment of two per cent or £5 per month, it would take you a whopping 90 years to pay it all back.

That is just at 20 per cent APR. Not at 4214% which was correct at the time this story went to print.

Now it is worth noting that the Financial Conduct Authority (FCA) assumes responsibility for the regulation of consumer credit in April.

Mike O’Connor, Chief Executive of StepChange Debt Charity, said that he hopes the FCA will address some of these issues.

He added: “The widespread harm and misery caused by payday loans continue unabated. The industry has failed to address the problems causing untold misery and damage to financially vulnerable consumers across the UK”.
“We hope the FCA’s proposals will address some of the areas of consumer detriment, but on issues such as affordability checking, rollover and repeat borrowing, there is an urgent need for even more radical reform”.

Unfortunately that seems unlikely, when you consider the corporate interests in maintaining high debt levels.

In fact, the StepChange charity highlighted the case of one man whose original £200 debt grew to £1,851 in just three months, thanks to inflated interest rates.

And this highlights an important problem. Most people simply do not realise just how rapidly their debts can run into the thousands before they take out a loan.

Fewer people realise that payday loan firms such as Wonga have previously advised the government on how to deal with consumer debt in the UK.

This essentially means that the government is working alongside those very companies who help to trap people into debt in the first place.

Further research conducted by YouGov for StepChange Debt Charity found that at least 26.3 million people had been offered high-interest credit such as payday loans via unsolicited marketing calls or texts.

These are often taken up by vulnerable, or desperate people who are uneducated about the high costs of loans.

And in most schools across the UK, financial management is not part of the curriculum.

Therefore, if you are struggling with money problems, avoid payday loan companies at all costs. It is better to speak to an independent charity or financial advisor who will offer help and advice for free and advise you on ways that you can make your budget go further.

> Or credit unions.

Source –  Akashic Times,  28 Feb 2014

http://akashictimes.co.uk/beware-of-the-loan-sharks-charity-highlights-predatory-behaviour-of-payday-lenders/