When it took over regulation of consumer credit in April of this year, the FCA requested information about the volume of Wonga’s relending rates. The information received suggested that Wonga was not taking adequate steps to assess customers’ ability to meet repayments in a sustainable manner.
The FCA has agreed an approach with Wonga for remedial redress for those customers who were affected by inadequate affordability assessments:
Wonga will be contacting all customers by 10 October to notify them if they will be included in the redress programme. Customers should now continue to make payments unless they are told to stop by the firm. Borrowers who are experiencing financial difficulty, should contact Wonga to discuss their options.
The FCA will continue to work with Wonga to identify whether there is any other remedial action required. If necessary, further details will be communicated by the firm in due course.
Clive Adamson, director of supervision, said:
“We are determined to drive up standards in the consumer credit market and it is disappointing that some firms still have a way to go to meet our expectations. This should put the rest of the industry on notice – they need to lend affordably and responsibly.
“It is absolutely right that Wonga’s new management team has acted quickly to put things right for their customers after these issues were raised by the FCA.
Effective today, Wonga has introduced new interim lending criteria that should improve customer outcomes. It is also working to put in place a new permanent lending decision platform as soon as possible. The FCA has also required Wonga to appoint a Skilled Person to monitor the new lending decision platform to ensure it has the desired effect; the Skilled Person will report to the FCA and give an independent view of the firm's activities.
1. The agreement with the FCA says:
3. The Money Advice Service provides free and impartial advice to people in financial difficulty, for further information www.moneyadviceservice.org.uk
4. On 25 June 2014, the FCA announced that Wonga would pay redress for unfair debt collection practices http://www.fca.org.uk/news/wonga-redress-unfair-debt-collection-practices
5. On 15 July 2014, the FCA announced its proposals for a price cap on payday lending http://www.fca.org.uk/news/fca-proposes-price-cap-for-payday-lenders
6. On 12 March 2014, the FCA announced a thematic review into the way payday lenders and other high cost short term lenders collect debts and manage borrowers in arrears and forbearance.
7. On 1 April 2014, the FCA took over responsibility for consumer credit and the regulation of 50,000 consumer credit firms, including logbook lenders, payday lenders and debt management firms.
8. On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
9. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
10. Find out more information about the FCA.
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