The Wonga Administrators sent a letter in late October to some of Wonga’s creditors with their proposals to handle the administration. These include:
- background on the events before administration;
- how to decide the payday loan affordability complaints that have already been sent to Wonga; and
- how to encourage other customers to submit a complaint.
These Proposals were agreed by a vote of creditors.
This article has extracts from the proposals. You can see the full version at Companies House. The bits in italics here are quotes from the proposals; the bits not in italics (including the headings) are my comments.
What happened before Wonga’s administration
In early 2018, WGL commenced a process to secure debt funding to support a 5-year growth plan both for Wonga UK and the overseas subsidiaries. By March 2018 the Group had identified 3 potential funding partners and at that stage there was a clear expectation that the funding could be secured, subject to appropriate due diligence and negotiations.
During 2018 two factors changed the outlook for both the UK business and the wider Group:
• An interim determination from FOS
• An increase in the level of complaints.
Over 6 year complaints
Wonga UK’s assessment of its potential redress liability in relation to borrower complaints and subsequent
cash outflow was based on a time limit of 6 years.
In late March 2018, Wonga UK received an update on the likely outcome of an interim determination by FOS that a borrower complaint that was older than 6 years may be considered within the time limits for a valid complaint…
If the interim determination was upheld, it would result in a significantly higher level of potential redress liability than was originally forecast. This would have a negative unquantified impact on redress provisioning…
… on 17 July 2018 the Group raised c.£11 million from an equity placement with certain existing shareholders. In advance of the equity investment, the Group had engaged corporate finance advisors to commence and manage the sale of Wonga Poland on behalf of WWL.
On 28 August 2018, FOS confirmed its final decision on the borrower complaint on the same terms as the interim determination.
FOS has now published two decisions on as general guidance, see Ombudsman decision on payday loans over 6 years. Both of these show that FOS thinks it has the jurisdiction to consider older loans.
Increased numbers of complaints in July and August
… it was found that the July 2018 complaints level had increased to around double the historic run-rate. This increase arose primarily from submissions from Claims Management Companies (CMCs) in late July however there was also a significant increase in direct complaints from borrowers.
In August 2018 complaints continued to increase and had risen three times higher than the level received earlier in 2018. The Group assessed that the cashflow impact of this level of increased claims would be beyond the resources of the Group, even with the sale of Wonga Poland.
Loans which haven’t yet been repaid
Some statistics on the loan book included in the Proposals:
- 206,000 borrowers at the start of administration. The value of current balances (that is those not in arrears) was c £21m and in arrears was c £56m.
- at 12 October c £9m had been collected.
- most of the arrears at 12 October are for one-month loans, where the outstanding balance is c 35m and c 30m of that is over 6 months old.
Given the short-term nature of the loan book, the initial strategy is to collect loans as normal whilst the Administrators investigate the opportunity for a sale of the residual loan book, and any other assets of the UK trading business.
From comments on the Wonga refunds – the latest news page, people who have complained and who currently owe a balance are being asked to repay it. That seems to me to be an unfair way to treat a group of potential creditors as anyone with a successful complaint would have the right to set off the refund against the balance.
The sale of the residual loan book may be complicated as a significant number of those customers may potentially have good affordability complaints.
For clarification, if there is a debt sale of the outstanding loan book, it is not envisaged that any purchaser will assume any of the existing liabilities (including redress claims) of Wonga UK except to the extent that by law they are compelled to do so.
I am not a lawyer and I can’t comment on whether what would happen to the right of set-off if a loan is sold. There would seem to be three possible cases: customers who had already made a complaint before the loan was sold; those who complained after the loan was sold but before the company is wound up; and those that complain afterwards.
UPDATE The Wonga administrators later decided not to sell the loan book and instead offered people owing balances the chance to settle for a lower amount.
How current complaints will be decided
Outstanding complaint numbers:
- at the start of administration there were 24,000 claims awaiting a decision by Wonga and 9,500 claims with the Finacial Ombudsman (FOS);
- since then between 200 and 500 claims a day have been received.
The Administrators are unable at this time to forecast the likely volume of redress creditors [those are the people who should get refunds for unaffordable lending] and the total estimated value of these claims, albeit we expect that redress creditors will be the majority unsecured creditors in the Company.
The Administrators are in the process of defining and building an adjudication tool based entirely on data points within the Company’s possession. The FCA and the FOS have been consulted during the development of this tool to ensure that they are aware of the Administrators’ intended process. The Administrators’ intention is for the adjudication tool to automatically adjudicate claims, aligned as closely as possible to the current FOS methodology. The costs of the Administrators undertaking a wholly manual review of each claim would likely result in little to no funds being available for distribution to any unsecured creditors of the administration.
“Current FOS methodology” involves looking at bank statements and credit reports as well as the Wonga loan history. Any automated tool is going to be a very rough approximation.
How fair the process is will depend on the details of the decision-making in the automated tool. I hope these will be published.
I expect that it will be based around a definition of where a chain of loans – loans with only small gaps between them – is likely to form irresponsible borrowing. And that loans over 6 years old will be included.
UPDATE the administrators did provide more details later on. All loans over 6 years were automatically included.
FOS said last week that it will not be working on the current Wonga complaints, which will be returned to the Administrators.
For those claimants who were given final response letters by the Company prior to the administration, the Administrators will adjudicate these claims as being accepted and as unsecured creditors.
If it is just saying that anyone who has already been made an offer by Wonga is going to be an unsecured creditor that is fine.
But if it is saying that the refund award for claims that were sent to FOS will be set at what Wonga has already offered, I think that would be putting this group of creditors at a disadvantage.
UPDATE – this has now been clarified. The Wonga website says: Any claims with a final response letter from Wonga will be agreed based on the value of the Wonga decision, or if higher, at the Joint Administrators’ adjudication value.
Encouraging more complaints
The intention is for claimants to submit claims easily via the administration portal and notify the Administrators of the borrower account details if the borrower believes they have a claim.
This refers to customers who have not yet made complaints.
We will be communicating with potential redress claimants in the coming months to explain how they are able to submit claims and will be regularly updating the Company’s website (www.wonga.com/help) with further information. The Administrators will also undertake a national advertising campaign to alert all possible redress creditors who may have changed contact details since they last engaged with the Company.
So the Administrators will be writing or emailing Wonga customers who have not yet submitted a complaint. It’s not clear if they will try to contact every previous customer or just those where the automated tool shows that they would get a refund.
Possible sale of borrower details
To date there have been c.60 expressions of interest … across the Group’s assets including the loan book, IT platform, brand name and borrower database.
UPDATE the Administrators did not proceed with this.
How long will all this take?
due to the complexity and volume of claims we expect to adjudicate, the administration is likely to take more than 12 months.
Normally administrations take less than a year. As this will take longer, the Administrators will have to go to court and get permission.
Our next report to creditors will be a progress report for the period 31 August 2018 to 28 February 2019, to be delivered within one month of the end of the period.
UPDATE here is my article on the March 2019 report.
My conclusion
This is broadly what I expected.
Some people may feel upset that the automated tool for assessing complaints means their case won’t be “properly looked at” and that the Financial Ombudsman won’t be there as an appeal mechanism. But I think this is inevitable – there is no point in a complex process that will cost so much that there is no money left to pay any refunds.
I do have concerns about customers with current loans who are being asked to repay these despite having made a complaint about irresponsible lending. And I think any sales of the loan book should be postponed until after the campaign to encourage customers to complain has finished and all complaints have been determined.
Wonga refunds – this kept updated
QQ and loans over 6 years old
SafetyNet Credit goes under
Kirsty chapman says
Hi,
Can you resubmit a complaint if they’ve already turned you down once before?
Thanks
Sara (Debt Camel) says
I doubt it – not unless it was a substantially different complaint.
Jen says
Sara just read this, I’ve a complaint with FOS all loans over 6 yrs with Wonga since June 17, I paid 4.5k in interest, should I put a claim with the administration company or leave it with FOS. Thanks
Sara (Debt Camel) says
FOS has said it is returning all Wonga complaints to the administrators – you shouldn’t need to do anything.
Jen says
Ok thanks hopefully sorted out next year
G says
Hi Sara, I started my complaint which they have registered the day before they went into administration, I get emails saying they will get back to me. But they are also chasing the 2K loan outstanding that Im no longer paying given that my complaint based on their figures is in excess of 8K.
Having the concern that the debt may be sold at some stage adding further complexity, and the unlikelihood of getting anywhere near the 8K on a successful complaint do you think that at an appropriate point, contacting Wonga adminstrators proactively suggesting a mutually agreed settlement of writing off the loan to settle the complaint would be a worthwhile consideration?
Sara (Debt Camel) says
I suspect at the moment the Administrators are too busy sorting out procedures for everyone to be interested in negotiating with an individual.
Until they have their “automated tool” they are unlikely to either take your word for it that your complaint may be worth 8k or be prepared to spend any time in looking at it to see if that is likely. Once they have their automated tool then there will be a figure and if that is more than your 2k balance then it should be written off without you needing to negotiate anything.
So just standing firm and ignoring their attempts to collect the loan seems best for you at the moment.
Suzanna Walker says
It’s really important to realise that the more complaints they receive the more they will dilute what everyone will receive. The cost of any person to investigate a complaint is a manually intensive process. Administrators have to pay staff and it will be expensive to pay those staff. The costs of an administrator take precedence over all other creditors and considering that FOS would be due £650 for each of the 9000 complaints which they are returning to the Administrators gives a good indication of how the money available will be quickly spoken for. The sale of the book will release more funds so the quicker that is done the better. The longer it goes on the more the Administrators fees will be.
Sara (Debt Camel) says
“It’s really important to realise that the more complaints they receive the more they will dilute what everyone will receive.” As I have said.
“the sale of the book will release more funds so the quicker that is done the better” but the majority of the performing end of the book is very short term, so it is surely quicker to just collect it rather than sell that a discount?
There is also the significant problem of selling a loan where the customer has a potential complaint which, if upheld, should be set off against their balance owed.
Cally says
Hi Sara,
I had confirmation from Wonga my redress amount would be paid within 14 days after they received my banks details, the day before they went into administration.
I see others have received letters/emails and voting forms. I haven’t had any of this- should I be concerned?
Thanks!
Fazza says
Cally same thing happened to me, would it be possible to withdraw my acceptance of the final offer and go through the automated claim.
Sara (Debt Camel) says
I doubt it. You accepted an offer. Also it’s not clear yet how much anyone will be offered through the automated claim.
Karen says
Hi Sara,
I received an offer from Wonga of £1500 which I turned down. My complaint is currently with the FOS and I have received a letter that it will be passed to the administrator for a decision.
Am I right in thinking that any refund will be based in the £1500 already offered by Wonga, and my complaint will not go through the automated process? Since I was already made a final offer by Wonga?
Sara (Debt Camel) says
I was concerned about that but the administrators have now clarified it…”Any claims with a final response letter from Wonga will be agreed based on the value of the Wonga decision, or if higher, at the Joint Administrators’ adjudication value.”
So they should run your case through the automated assessment process they are developing and if that gives a larger number than £1500 it will be used instead.
Karen says
Thank you Sara.
I know it will be a long wait, but hopefully I will receive something.
I’ve calculated my interest at over £6000.
I know I won’t receive anywhere near that amount, but hopefully I’ll at least get the £1500 already offered by Wonga.
Charlie H says
Hi Sara,
I’ve written to both Wonga and GT now and had no response as to whether i will be receiving a letter regarding the proposals as an unsecured creditor. The only thing i could get out of Wonga themselves was that i was showing as having remittance outstanding so again, I’m not sure what criteria GT used to decide who got letters and who didn’t. Quite frustrating really but if you come across anything that might help, it would be much appreciated as usual.
Sara (Debt Camel) says
I am not sure either :( As the deadline for getting the Proposals and voting has now passed, it probably isn’t worth pursuing this – Wonga clearly has your name on its records. The article above has been updated with a link to the proposals as they have now been published at Companies House.
Jade says
Hello Sara
Just received another letter from GT to say that
I write to advise you that the joint Administrators statement of proposals was approved on 9th November 2018 by decision procedure.
This letter is for your information and no action is required
Has any one else received this letter and what does this now mean ?
Jade
Josh says
Hello,
Thanks for your response even though I didn’t write to you to be told I’m foolish that’s not what I asked, I don’t need to know that, I’d guess the situation I’m in is very unfortunate and for me anyway was unforeseen. Tbh it wouldn’t of left me much time to find work anyway.
I come for advise, but the information given I am grateful for so thank you.
Thanks for your time.
Sara (Debt Camel) says
yes, my apologies, I was just horrified…
Josh says
That’s fine, I just didn’t need to be told that as my stress levels are very high now and I am horrified myself.
I’m self employed so I can lose work or given none without any notice.
I was looking at applying for universal credit but I live with a partner who is also self employed and being self employed is hard to give accurate income it also stated I need to apply together in order to apply?
I assume this will effect my application?
When working I do get a good salary (which was on price basis not a day rate) which in turn takes my costs of living up so when I don’t work or have time off it effects me massively as self employed/sub contractor I don’t receive the same rights as employees who receive holiday/sick pay etc etc
History may suggest I earned well when I have work but mainly down to payday loans it takes/taken my earnings down considerably and forced me into prioritising the payday payments over anything else due to high interest rates.
Is there any other option other then universal credit?
The fact it’s coming close to Xmas holidays makes it hard to look for work now and will be far easier in the new year of which I have another redress due but I am not going to rely on that this time.
Thanks again for your time
Sara (Debt Camel) says
UC applications are joint applications. your local Citizens Advice can help if you find it hard because your partner is self employed. There is unlikely to be any other options than UC, bit CAB can look at your full benefits situation.
Who is the other lender you are hoping for a redress payment from?
I think it would be a good idea for you to talk to a debt adviser about your situation. That could be CAB but you might find Business Debtline https://www.businessdebtline.org/ more practical about coping with the problems of erratic income. They cover business and personal debts for people who are self-employed or with small limited companies.
Josh says
Ok thank you.
If working I am fine but I can’t get work until the new year now, but there is no protection for self employed if you become out of work or taken ill or have holiday etc.
I have numerous cases with payday loans, one was 247moneybox who again fell into administration, MYJAR which the case I had to escalate to the FOS likelyloans which I raised not long ago and the one I’m due redress on next year by January 13th is Sunny which £2969 was agreed to refund me.
Is there any news on sunny’s financial state as I didn’t agree with there offer as they only offered refund on loans 25-47 and 47 loans is the total I’ve had but now I’m just in gmfear it will go into administration like others so agreed the redress.
Thanks for your time Sara.
Sara (Debt Camel) says
Most people who find self employment works for them put aside a chunk of money when they are paid against the times they are not in paid work. And for tax – will you have a lot to pay at end January? So you have to manage on less – possibly quite a bit less – when you are in work and at that point you may not be fine at all.
No news on Sunny.
Josh says
Hi,
Yes unfortunately due to having numerous payday loans I didn’t have spare money to put aside.
I wasn’t expecting to be out of work either it came as a surprise to me so I was expecting to be working for my old contractor still.
Tax I don’t even want to think about atm, I can’t even afford an accountant to do it so that’s just another thing to worry about as I’ve got so many worries I can’t afford to look at future and only the here and now.
Ok thanks again. I just hope I get some kind of redress as if companies keep going into administration it sets me back further.
In all honesty I think it was a silly time to force payday companies into administration if their not prepared to help the customers who were waiting for a redress already because of it being so close to Christmas as well as the staff losing their jobs also.
I assume the piggybank owners will still be able to put Christmas dinner on the table!!!
I understand piggybank owners own a number of companies inc amigo loans and mortgage companies/ graphic design companies so will assets be taken from them companies if need be to cover refunds and costs do you know?
Thanks again for your time
Sara (Debt Camel) says
I think you have to talk to Business Debtline now if you don’t have the tax money put aside.
Josh says
Well usually I’m owed money after expenses are accounted for but I think it works out even. I work as a sub contractor but on a self employed basis so Tax would come out of my wages each week.
Sub contracting is basically working for a company with no employee benefits and is complicated when comes to the line of work I’m in where you work for a contractor but they state you have to be self employed.
Thanks anyway for all your help
Andrew says
Well my redress was declined but there is still a balance owed. they are not replying to my emails to set up a affordable payment plan. What should I do next?
Sara (Debt Camel) says
Another person was told they would hear after 20th December.