finance

What will happen to your Wonga debts if it collapses and what are the compensation claims?


PAYDAY loan giant Wonga has confirmed that its UK and parent companies will go into administration but what does that mean for your debts?

The company has been in trouble for some time now, and was kept afloat three weeks ago thanks to a £10million emergency cash injection from shareholders.

 Wonga is said to be struggling to cope with an influx of new compensation claims

Alamy

Wonga is said to be struggling to cope with an influx of new compensation claims

Wonga is processing thousands of compensation claims after it was accused by customers of irresponsibly lending, targeting vulnerable customers and charging sky-high interest back in 2014.

Sky News reported that the cash injection led to an influx of new claims and the firm has been unable to cope with the demand.

On the afternoon of August 30, 2018, payday lender Wonga confirmed that its UK and parent companies will go into administration.

The company is set to appoint Grant Thornton as administrator and city regulators are reportedly in talks with Wonga over selling parts of the firm in an effort to save 500 jobs.

The company has also stopped issuing new loans.

It also pays to be prepared and it’s important to know your rights.

 Wonga is reported to be on the brink of collapse

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Wonga is reported to be on the brink of collapse

What happens to your debts if Wonga goes bust?

Unfortunately, when Wonga does stop trading, it won’t automatically mean your debts will be written off.

When the firm goes into administration, administrators will take over the running of the company.

This means that if you have a loan with the payday lender and are still paying it back, then you will have to continue your payments as normal.

This is because this side of the business will still be running, even if the firm can’t lend any more.

Wonga could potentially try and raise funds by selling these debts on.

If this is the case, the company that buys the loans will have to meet certain regulations set out by the Financial Conduct Authority (FCA).

Do my rights change if my debt is sold?

ONCE your debt is sold on, you’ll owe the new creditor money and not Wonga any more.

The new debt collector has to follow the same rules that were given to you by the old company when you took out the loan and you will keep all the same legal rights, according to debt charity Step Change.

This means that it can’t increase the amount of interest you pay or add on any charges, unless the original credit agreement specifically says that it can.

Why is Wonga paying out compensation?

Four years ago, the city watchdog, the FCA, ordered door step lenders such as Wonga and Quick Quid to compensate borrowers who slipped into more debt as a result of irresponsible lending before a cap was brought in in 2014.

Customers were charged sky-high interest rates on cash loans they couldn’t afford to pay back, pushing them further into a spiral of debt.

Payday lenders were also accused of specifically targeting vulnerable borrowers.

Recently, the firms were slammed by claimant experts for “dragging their feet” over handing over payouts.

Vincent Vernon from Pay Day Refunds said it is dealing with 32,000 customers and claims a quarter of which are with Wonga.

How to claim compensation from payday lenders

IF you think you are owed compensation from a payday lender, here’s how to claim according to money blogger DebtCamel:

You’ll need to prove that you couldn’t afford to take out the loan at the time that you borrowed it. If having the loan meant that you couldn’t pay your bills or other debts then you were irresponsibly lent to.

You may also me entitled to compensation if you made any late repayments or if you took out back-to-back loans because this shows that you really couldn’t afford to take out a new loan.

Look back through your emails, bank statements and credit report for evidence.

You’ll need to write a formal complaint letter to each lender explaining how you were irresponsibly lent to and include the evidence.

You’ll need to cite “unaffordable loans” and ask for a refund of the interest and charges you paid, as well as the 8 per cent Ombudsman interest on top.

Make copies of all of the evidence before sending anything in case anything happens to them.

Also ask for the loan to be removed from your credit record.

You can find a letter template on the Debt Camel website.

Wait up to eight weeks to hear back from the lender. If you’re not happy with the answer, or they don’t get back to you, contact the free Financial Ombudsman Service.

How do I know if I’m owed compensation?

To get payouts, customers have to prove that their financial situation worsened as a result of the loans and that the loans were irresponsibly lent to them.

They need to include details such as the address they lived in at the time they applied for the loan, and how easy it was to get the cash.

Some of these details can be tricky to recall and James Walker from complaints tool Resolver claims that firms are making it harder by shutting down customers’ online accounts.

Borrowers don’t need their online accounts to lodge a complaint though, as the firm is legally bound to keep a record of all of the loans it has given out over the past six years.

Can I still claim compensation?

Yes, you can still submit a claim if you feel that you are owed compensation but you might not see any of the money.

Once it’s clear what Wonga’s future is, you’ll potentially need to register a claim as a creditor to its administrator.

You’ll be added to a list of all the people who are owed money by the company.

Citizen’s Advice warns that bigger companies that the firm owes money to will get a payout first, so there might not be any funds left by the time they get to your name on the list.

Wonga hasn’t had to appoint an administrator yet though, so if you feel you are owed compensation then you should still submit your complaint to it.


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