The collapse of Wonga.com looks set to leave a lot of people out of wonga and out of pocket.
When the internet payday lender went into administration last August there were 10,500 consumers with complaints open with the Financial Ombudsman Service.
Their status is now very much up in the air, a fact underlined by a flurry of correspondence between the Financial Conduct Authority (FCA), administrator Grant Thornton and the Treasury Committee that was published today.
Nicky Morgan, the chair of the Committee, wrote to the administrator to raise the stricken borrowers’ plight and request information as to how their compensation claims are being dealt with following a to and fro with the regulator.
It’s hard to feel hopeful.
If Wonga had the money to pay them it wouldn’t be in administration. Now it is in that situation there are others who also have claims upon its assets, claims that may take priority over those of the aggrieved customers.
Were this a savings company of some description that wouldn't be the case. There would be compensation available to anyone losing out through the savings industry funded Financial Services Compensation Scheme (FSCS).
Trouble is it doesn’t cover lenders even though the FCA has been regulating them since 2014.
Andrew Bailey, the boss of the FCA, says consideration has been given to including them but “in the event of the failure of a lender… customers generally don’t suffer losses. Loan customers are more likely to owe money to the lend rather than the other way round”.
In most cases that’s true, but not in this one because of the way Wonga was carrying on. As a result thousands of people look set to be left out of pocket, calling that decision into question.
So what next?
Bailey makes the point that it would be a bit rum if the savings companies that pay into the FSCS were now called upon to bail out the past misconduct of a lender.
While some of them also are lenders, that’s by no means true of all them and so you’d be robbing Peter to pay for the misdeeds of Paul. His point is valid.
However, his letter to Morgan does rather have the feel of the FCA holding open its hands and saying, yes we know it’s awful but what can you do?
Perhaps he and his people need to think harder, and perhaps so too do Ms Morgan’s colleagues on the government benches. Perhaps they could exert some pressure on lenders to collectively act to make good the misdeeds of one of their own.
There may be other ideas. They need to be explored. Hard up borrowers being left out in the cold while better off savers are protected is not a good look in a society as fractured as Britain’s currently is.
Register for free to continue reading
Registration is a free and easy way to support our truly independent journalism
By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists
Already have an account? sign in
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies