Government may offer lifeline for Wonga customers ‘cast aside’ by regulators

More than 10,000 payday loan customers left with outstanding complaints about misselling that will not be resolved because lender has gone bust

More than 10,000 people who may have been missold expensive payday loans by Wonga have been “cast aside”, meaning the government may have to step in, MPs have said.

The lender collapsed into administration in August leaving 10,500 customers with outstanding complaints at the Financial Ombudsman Service (FOS) that are yet to be resolved.

The situation “cannot be right”, said Nicky Morgan, chair of the House of Commons Treasury Committee, in a letter to the Financial Conduct Authority (FCA).

“These people have been left to fend for themselves by Wonga, the FCA and the FOS,” Ms Morgan said.

“They’ve been allowed to fall through the cracks with nobody taking responsibility for their mistreatment.

“I have written to Grant Thornton, Wonga’s administrators, to understand how they intend to progress outstanding complaints against Wonga.

“If Wonga continues to damage people’s finances from beyond the grave, it may be time for the government to intervene.”

Caroline Wayman, chief ombudsman at the FOS, told the Treasury Committee last month that customers who had open complaints will not be able to have their issues resolved.

The customers, many of whom are considered vulnerable consumers, are also unable to obtain redress through the Financial Services Compensation Scheme (FSCS) because high-cost credit firms like Wonga are not covered.

The firm went bust after struggling to adapt to new affordability rules, a cap on total credit charges and an increasing number of complaints from borrowers.

Many of the complaints stem 2014 rules which tightened affordability criteria that payday lenders have to apply to prospective borrowers.

When a company is still solvent, customers sold loans that they were unable to afford can complain to the FOS to get their money back, including interest, charges and further compensation.

But Ms Morgan expressed the committee’s concern that Wonga’s former customers, many of whom are likely to be vulnerable, may be at a significant financial disadvantage as they are no longer eligible to claim through the FOS nor are eligible for compensation through FSCS.

In 2014 Wonga introduced a new management team and wrote off £220m of debt belonging to 330,000 customers after admitting making loans to people who could not afford to repay them.