Why isn’t Wonga on the platform? Fury against payday lender over fake legal letters used to intimidate debtors
Consumer groups and an MP are calling for a police investigation of Wonga after evidence came to light that he sent intimidating letters from bogus law firms to threaten overdue clients.
Britain’s biggest payday lender yesterday was named and humiliated by a town watchdog, who ordered it to pay more than £ 2.6million in compensation to 45,000 clients who received false letters.
But consumer groups say there is clear evidence of criminal deception and insist that the police be called.
Wonga slammed for pressuring debts to clients by sending letters from fake law firms
HOW THE BUSINESS COULD BE PROSECUTED
Wonga could be investigated for a range of criminal offenses, ranging from fraud to false identity of a lawyer and even blackmail, said attorney Dan Bunting.
It is a crime under the Fraud Act to make a dishonest misrepresentation, with the intent to gain or cause loss to others, when you know it is false and misleading.
The Solicitors Act of 1974 makes it an offense to falsely claim to be a lawyer, although there is usually a six-month delay from the date of that particular offense.
Wonga could also be charged with blackmail under section 21 of the Theft Act 1968 – because a threat to prosecute people could be considered “an unwarranted demand with threats”.
Mr Bunting said: “So while the ‘blackmail’ conjures up connotations of masked men making a ransom demand after a kidnapping, it may well be close.”
Shadow Minister of Consumer Affairs Stella Creasy called for a police investigation into Wonga saying, “Besides potential fraud, harassment of a debtor is a criminal offense.”
The MP pointed out that pretending to be a lawyer is also an offense under the Lawyers Act 1974.
She added: “The news that Wonga was sending bogus lawyer letters to cash-strapped clients who couldn’t pay their fees to scare them – and bill them for them – is further proof of the need. for Great Britain to get rid of these legal usurers. ‘
As the company presents itself as the ethical face of the payday lending industry with its friendly TV advertising puppets, a Financial Conduct Authority investigation has uncovered ample evidence of “rogue” behavior.
Among Wonga’s victims threatened by the bogus legal team was a woman who missed reimbursements because she was in the hospital recovering from a miscarriage.
The FCA said Wonga sent letters to overdue clients from what appeared to be two law firms, called “Chainey, D’Amato & Shannon” and “Barker and Lowe Legal Recoveries” – but these two companies were invented by Wonga to put pressure on customers.
In some cases, additional charges have been added to the outstanding debt to cover the cost of sending these threat letters.
Despite the overwhelming evidence, the watchdog added that £ 2.6million was the biggest compensation order he could impose on Wonga – as the wrongdoing happened before the implementation of stricter laws last year.
The founder of the Consumer Action Group, Marc Gander, said: “It seems to me that this was a criminal deception. Wonga invented lawyers and demanded 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 they don’t seem to have the will or the guts.”
Clive Adamson, Director of Supervision at FCA, said: “Wonga’s misconduct was very serious as it exacerbated an already difficult situation for customers in arrears.
“The FCA expects businesses to pay particular attention to the fair treatment of those who have difficulty repaying their loans.”
The £ 2.6million in repair covers a lump sum compensation of £ 50 for each of the 45,000 customers targeted between 2008 and 2010. Some will also get reimbursement for charges that were unfairly charged.
Ads for payday loans mostly air on daytime TV, raising concerns that unemployed people are being targeted
Payday businesses exploded during the recession, as desperate families turned to high interest loans to get by
However, this is a tiny figure in the context of the company’s profits, which are estimated to be over £ 100million a year thanks to the granting of over fourmillion loans a year to over £ 1million. of customers.
One of the company’s two founders, Errol Damelin, who was managing director at the time the threat letters were sent, resigned as chairman just two weeks ago in what appears to have been an exercise limitation of damages.
Martin Lewis, founder of MoneySavingExpert.com joined in the attack: “It just goes to show that if Wonga is hiring expensive marketing, public relations and public affairs consultants to try and position himself as the good guys in a bad industry, it just goes to show. is a sham.
“Using lawyers as bogus as your puppets and then having the guts to make people pay for it is a thug tactic, aimed at scaring and intimidating people already in trouble.”
Company Interim Managing Director Tim Weller said: “We extend our sincere apologies to anyone affected by the historic debt collection activity and for any distress caused as a result.
“This practice was unacceptable and we voluntarily ceased it almost four years ago.”
The founders who made £ 60million
An injunction to pay £ 2.6million in compensation is little more than pocket money for Wonga and its multimillionaire founders.
Errol Damelin and Jonty Hurwitz founded what is now Britain’s largest payday lender in 2007 and in two years they have raised £ 14million from investors in the city.
Today the two enjoy luxury homes and lifestyles with Mr Damelin’s personal fortune estimated at over £ 34million, while Mr Hurwitz is believed to be over £ 25million.
Their wealth was built on the backs of families who struggled for money during a six-year period of cost-of-living cuts, during which the company also drew widespread criticism.
Split: Errol Damelin and his ex-wife Julie, left, and software designer Jonty Hurwitz, right
Mr Damelin, 44, from South Africa, started his first business in Israel and became an investment banker upon arriving in the UK.
He was already a wealthy man when his family moved to a six-bedroom house in Hampstead, north London, in 2002.
The house was bought for around £ 580,000 and is worth at least four times that figure today. As the business grew, Mr Damelin is said to have paid over £ 1million a year while getting closer to the town’s investors who have invested a total of £ 100million in the colossus of loans.
While Wonga has been happy to send threatening letters to his clients, the businessman asserted that the loans he is giving are valid for good. He said in 2012: “Credit in the consumer society is absolutely essential. Without it you have no social mobility … rich people will stay rich. ‘
Despite his financial successes, Mr Damelin experienced a setback in his personal life and it emerged last year that he was separating from his wife Julie, the mother of their three children, after 15 years of marriage.
Like his partner, Jonty Hurwitz, 44, is also from South Africa. His background was in technology and he is credited with developing the software that rates clients on the Wonga site, but now he has taken a step back from running Wonga and enjoys seeing himself as an artist and web entrepreneur.
He married 41-year-old violinist Chloe Lander in 2001 and five years later bought a £ 950,000 house on the border of Surrey and West Sussex in order to lead a quiet life as a sculptor.
Writing about Wonga, he boasted of having been the “thinker, designer, visionary” at the “glorious moment” when the company started its activities. His art, he says, is a way of “making my ego feel fantastic.”