Wonga threatens customers with Debt Collectors

bailiff action

Payday loan company Wonga.com, which charges annual interest rates of up to 4,200 per cent, yesterday warned it plans to start using debt collection agencies to chase customers who fail to pay up.

During a grilling by MPs on the Public Accounts Committee, Wonga’s Henry Raine said the company has attracted more than 1million customers since it launched in 2007.

He said it has not ‘traditionally’ used debt collection agencies, but added: ‘We are looking at doing that. We will do a small trial of that.’

Liberal Democrat MP Ian Swales said he feared this may lead to people being ‘severely harassed’.

Mr Swales said many companies which use such debt collection firms, which buy bad debts and try to get them repaid, can be ‘very aggressive about trying to get their money back.’

Mr Raine, head of regulatory affairs at Wonga.com, told MPs, who are investigating consumer credit regulation, that the firm’s average customer earns around £20,000 – below the national average wage of £26,000.

He insisted it is using a regulated firm in an industry which is notorious for its aggressive techniques, such as sending bailiffs to people’s homes.

The online business lends people up to £1,000 and hands out the money in just 15 minutes, leading to criticism it is encouraging people to get into a cycle of debt from which they will struggle to escape.

The average sum borrowed by a customer using Wonga.com for the first time is £180.

Its average customer takes around four loans a year – a figure described last night as ‘alarming’ by the debt charity Step Change.
One of Wonga’s controversial advertisements, which appears on buses in London, boasts: ‘The money will arrive before you do.’
Margaret Hodge, the Labour MP and chairman of the Public Accounts Committee, expressed her scepticism at Mr Raine’s attempt to justify the business.
She said: ‘I think you are painting yourself as more perfect than I see you from what I have read about you.’

Mrs Hodge gave examples of people saying that money had been taken out of their account despite never taking out a loan with Wonga, Mr Raine apologised.

The average loan taken out by a customer using Wonga.com for the first time is £180 rising to £257 for an average loan for all its customers.

Quizzed by MPs yesterday about whether or not he would encourage his own family to borrow from Wonga, Mr Raine, a former lawyer, said none of them had taken out a loan.

He insisted his children were too young, his wife has not used the service but claimed he would hypothetically have used Wonga.com when he was ‘a trainee solicitor.’

Speaking after the committee hearing, Stella Creasy, the Labour MP and vocal critic of the payday loan industry, expressed her shock at how many loans a typical customer takes out.

She said: ‘The aim is to find the people who are going to have to keep on borrowing because the biggest profits come from people who are going to have to borrow and borrow and borrow.’

Una Farrell, from the Step Change debt charity, said: ‘The fact that the average Wonga customer takes out over four loans a year is alarming.

‘It suggests that its customers are repeatedly finding themselves in financial difficulty and having to resort to these very expensive loans. Unfortunately using high cost credit like this is only going to add to their burden’

Leading UK Private Debt Collection Agency Frontline Collections has already publicly stated their refusal to deal with any Payday loans companies, citing moral reasons was behind their decision.


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