The payday lender Wonga has told MPs it is “halfway” through turning around a failed culture that landed it with heavy fines and forced it to write off the debts of 330,000 customers – but also admitted thousands of people entitled to compensation have yet to be paid.
Appearing before the Treasury select committee, Nick Brookes, the company’s recently appointed chief credit officer, brushed aside the suggestion by one committee member that Wonga had got off lightly when it agreed to write off £220m customer debts, as part of a deal with the Financial Conduct Authority (FCA).
Brookes, who joined Wonga two months ago as part of a management shakeup designed to restore trust in the company, repeatedly said the company was working hard to turn its culture around, and was about “halfway there”.
In June the FCA fined Wonga £2.6m for sending threatening legal letters from fake law firms to 45,000 customers.
But Brookes revealed to the committee chairman Andrew Tyrie that Wonga had written to only 27,000 of the affected customers to offer them compensation, and that 99% had accepted their terms. He said the complexity of identifying customers who were sent the letters between 2008 and 2010 was making the process “challenging”.
He also said the staff responsible for sending out the letters were “no longer with the business”, but conceded other key executives were still in place.
Brookes told the MPs that Wonga had introduced tough new affordability checks for loan applicants as well as a three day grace period to help customers who had missed payment deadlines. Under questioning he admitted it was still possible for applicants to get a loan in as little as five minutes if they were quick typists. He also revealed that 90% of the company’s business came from existing customers who had already taken out a loan.
Responding to a question about why a five year-old child had asked their parents for Christmas presents funded through Wonga cash, Brookes said the company had temporarily stopped all marketing operations, including pulling its TV ads and removing its name from Newcastle United’s children’s shirts.
He also claimed that many of the complaints he received were from consumers denied a loan under the new affordability terms.
Committee chairman Andrew Tyrie said: “The 18,000 customers who received misleading letters from ‘fake’ law firms but, who have yet to be contacted by Wonga, are evidence that a lot more work is needed to change the industry’s culture, as with so much of banking.”
Joanna Elson, chief executive of the Money Advice Trust, said: “The fact that so many customers are yet to respond to the letters that Wonga have sent out is a concern – you have to wonder how many of these envelopes have gone unopened.”
