Treasury Committee chair Nick Morgan has warned that the government may need to step in after more than 10,000 former Wonga customers were left out of pocket by the firm from “beyond the grave.”
The high-cost lender went into administration last August after a 2014 change in regulations saw the firm inundated with compensation claims, writing off debts of £220m for some 330,00 customers.
But the firm’s collapse has meant that 10,500 customers who had complaints lodged with the Financial Ombudsman Service (FOS) were not able to have their cases resolved.
And there is currently no requirement for high-cost loan customers to access the Financial Services Compensation Scheme (FSCS).
Chair @NickyMorgan01 said that Wonga compensation claimants have been "left to fend for themselves".
— Treasury Committee (@CommonsTreasury) February 27, 2019
Morgan has written to both the FCA and Wonga’s administrator Grant Thornton to highlight her concerns that vulnerable customers could be left out of pocket and in poverty without access to compensation of some sort.
“It cannot be right that over 10,000 people who may have been mis-sold loans are just cast aside, especially as many will be vulnerable consumers,” said Morgan, who has spoken up in her support for Big Issue founder John Bird’s bid for fairer credit with the Creditworthiness Assessment Bill.
“These people have been left to fend for themselves by Wonga, the Financial Conduct Authority and the FOS. They’ve been allowed to fall thought the cracks with nobody taking responsibility for their mistreatment.
“If Wonga continues to damage people’s finances from beyond the grave, it may be time for the government to intervene.”
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In response, FCA chief executive Andrew Bailey wrote back to Morgan to explain why high-cost loan customers do not have access to the compensation scheme.
He explained that the firms do not hold client money or assets, steps like their price cap have boosted “supervision and authorisation” of the sector and introducing cover would not be sustainable.
But Baily did admit that customers had still suffered from the actions of Wonga and others in the sector.
“While there is growing evidence to indicate that our interventions in the sector have had an impact on mitigating risks of harm to consumers, including vulnerable customers, we are aware that in some cases conduct breaches have led to losses to consumers.”
The Big Issue is working to prevent customers from falling into the devastating cycle of mounting debts that many high-cost credit customers experience. Our social investment arm, Big Issue Invest, work with ethical lenders like Moneyline, Street UK, Fair For You and Five Lamps to tackle offer more sustainable alternatives to accessing fair credit.