Daily update: 19th February
On the 13th February, the first payouts for unaffordable Wonga loans were made and continued on the 14th. A very small number of payments were received over the weekend. A lot more payments were made yesterday on the 17th. Not many reported by readers on the 18th.
The payments appear to be in a random order – not alphabetical, by bank, by date of claim, size of claim or by when you received the “4.3% email.”
If you haven’t yet had your money, there is no reason to be worried if you had the “you will get 4.3%” email in January and if your bank account details are correct.
A blogger contacted the Administrators on the 14th to ask why she hadn’t been paid and was told:
“I can confirm that the joint administrators have commenced distribution of dividend payments to unsecured creditors, including those with redress claims. Given the volume of transactions that need to now take place, the administrators cannot guarantee an exact date when individuals will receive payment but are aiming to complete transactions within the next two weeks. During this period, the Customer Care team will be available on email@example.com or 0207 138 8330, for any further questions.”
You are not sent an email beforehand to advise the payment has been sent. The payments show on your bank statement as WDFC-REDRESS, WFFC-REDRESS or WDFC UK LIMITED[reference number].
- A small number of people seem to have been paid a lower amount than they expected. If this has happened to you, read The small number of extra payments section below. That may explain why. Contact the administrators to confirm this.
- Some people have been paid who never got the 4.3% email. If you have not received the “you will be getting 4.3%” email, this doesn’t mean you won’t be paid. But if you want to confirm you will be paid, contact the administrators.
- If you have not received the “you will be getting 4.3%” email AND you have not received an email from the administrators confirming what the amount of your claim (most of these were sent out September-December last year) you MUST contact the Administrators URGENTLY. A few people who had an agreed claim with Wonga but have not since heard from the Administrators are in this category.
I have received some clarification from the Administrators about tax, outstanding loans and what will happen if the money bounces back because you no longer have that bank account. See below.
Administrators announce 4.3p in the pound
The Administrators announce the low payout
On 29 January 2020, the Wonga administrators announced that they will be paying 4.3p in the pound to unsecured creditors, including all the 400,000 people who are owed a refund for unaffordable lending.
People have had emails saying what they will receive. The administrators say they have all been sent so if you have not received one you need to check with the administrators at firstname.lastname@example.org or on 020 7138 8330 and ask them to confirm that you are going to be paid.
What happens next:
- the money should be paid within the next 4 weeks. This has come as a surprise as people had been told it would be paid by the end of January;
- the loans that are being refunded should be removed from your credit record in the next 6 weeks.
My comment – ripped off by Wonga and now let down by the regulators
The administrators told people they would get “significantly less” than that amount as there would not be enough money to pay the claims in full.
But many people will have been hoping for more than 4.3% and are very upset.
It is not the administrators’ fault there is so little money to be divided between so many people. It is the fault of the regulators – first the OFT and then the FCA – that they allowed Wonga to break the rules saying that affordability should be checked
And now the regulators have failed to ensure that these Wonga victims get the compensation they should have. When a PPI firm went under, the Financial Services Compensation Scheme stepped in and people with PPI claims got paid in full. But the FCA has not extended the FSCS to cover payday lenders.
This isn’t just a problem for the hundreds of thousands of Wonga victims. Borrowers from many payday lenders have been unable to get proper compensation after the lender has had to close. This will apply to QuickQuid, the money shop, Payday UK and Payday Express borrowers as well.
The FCA needs to rethink this and provide a safety net for people who were mis-sold unaffordable loans.
Readers comments – Shock and disappointment
This a brief overview of the hundreds of comments below this article.
Some people are happy to be getting anything:
- “I am only getting just shy of £25 but for the sake of completing a 30 second form it’s not too bad.”
- “I will be getting £79.93 of the £1854.17 I was owed. Better than nothing!”
- “£35 out of a possible £800. I wasn’t expecting much anyway. I’m more interested in having the 25 wonga loans removed from my credit file.”
The administrators had said people would get “significantly less” than the claim, but many people were hoping for at least 10%:
- “I got mine £88.67 – claim was £2057.05 – I was expecting at least a couple hundred.”
- “Claim was 3034, getting 130. By considerably less I didn’t think it would be over 95% of it. That is ridiculous.”
- “To receive £44.10 from a claim of £1023.00 is insulting to be honest.”
- “Owed £1499, getting £63…what an absolute joke!”
- “4.3% is an absolute disgrace. Although people are trying to be positive they shouldn’t have to. The people who made all the profit here would spend the biggest payout anyone has received on an evening out and not think twice about it.”
- “Gutted…. was hoping for at least the 10% speculated.”
This reader blamed not just Wonga but the regulators:
- “Over £11k accepted reduced down to £480 – my job, my marriage and 4 years of desperation followed by years of rebuilding my life – that’s what the regulators consider that to be worth! Shame on everyone involved in Wonga and the lack of regulation of lenders like them !”
Some are just are delighted that Wonga has gone under:
- “Heads up everyone…We have won in the end! They can no longer be a hindrance to any of us any more!”
- “Mines going to charity. Best thing to have happened is for them to have gone bust”
- ”Thank you Wonga you paid me to continue gambling, I lost everything. Good riddance.”
Many people are also disappointed and shocked that they aren’t being paid by the end of January. Some people getting these refunds are still in difficult financial circumstances and had planned to use the money to pay a bill or some debts.
Clarifications from the administrators
The remaining loans
The administrators have confirmed that no further payments are being accepted and the debts will not be sold to a debt collector. So you don’t have to worry about being taken to court or bailiffs.
But the debts are not being written off. They will remain on your credit record for 6 years from the default date on your credit record. If you don’t know what this date is, I suggest you check it now.
No deductions are being made for tax
The Administrators have said:
“the Joint Administrators have agreed with HMRC that the payment may be treated for tax purposes as set wholly against the interest and fees element first, and statutory interest second. As a result, where the distribution paid by the administrators to each customer does not exceed the interest and fees claimed by them, no withholding tax will be required to be deducted at source from payments made by the administrators in such cases.”
The simple version of this is:
- the administrators are not taking off any tax.
- there will, therefore, be no tax to have to reclaim.
- the vast majority of people will not have to pay any tax on any part of of the refund even if you are a higher rate taxpayer. The amounts don’t have to be declared if you complete an annual tax return eg if you are self-employed.
There is only one exception here and it is VERY SMALL:
“Where the distribution paid by the administrators exceeds the interest and fees claimed by a customer, the remainder is a payment of statutory interest, therefore tax at 20% should be withheld from that element of the payment. This scenario impacts only a very small percentage of the creditor population… the administrators will separately communicate with these creditors following payment of the dividend.”
No-one should worry that they may come into this exception or what happens if you do. You will be told about this.
The small number of extra payments
Some customers were owed money by Wonga for a different reason, for example they may have overpaid on a loan. Most people aren’t owed an extra small amount. If you haven’t heard anything about this, you will not be getting any extra money.
These extra amounts are also being paid out and you will get 4.3% of them too.
If you were not using a claims company, you should have received a single email at the end of January which mentions both amounts. If you were using a claims company you should have received two emails, each about one of the amounts.
If you have only received one email and it mentions a claim which is smaller than the amount you expected, you can contact the administrators at email@example.com or on 020 7138 8330 to confirm that you are still being paid the redress for unaffordable loans.
Bank account issues
I asked the Administrators why some people are still getting emails asking them to update their bank details. They say:
These emails will be in response to customers’ requests received by the Customer Care team prior to 29 January 2020 providing a secure method by which customers can update their bank account details. Customers should respond to these emails.
I asked the Administrators what will happen if they make a payment and it bounces back to them because the account is no longer open. They say:
Where updated information is available from customers we will attempt to reprocess bounced dividend payments via electronic transfer. Alternatively, we will issue a cheque to the address held on file.
What is an affordability complaint?
A payday loan is “unaffordable” if repaying meant you had to get into more debt, by borrowing again or getting behind on bills or other debts. So you may have repaid all your loans but still have a good claim for a refund of the interest you paid.
If you borrowed from other payday lenders, read How to complain to a payday lender.
The deadline for making these claims to the Administrators has passed.
How many people had a claim against Wonga?
When Wonga went under:
- there were over 200,000 people with current loans from Wonga – many of them had a good case for the interest to be removed from their balance so they only repay what they borrowed;
- there were 24,000 affordability complaints awaiting a decision by Wonga and 9,500 complaints against Wonga with the Financial Ombudsman;
- by end February 2019, the number of complaints had increased to 49,000
- at end August the number of complaints had gone up to 560,000, with 389,000 of these having a valid claim.
The administrators have now given the final numbers:
- they assessed 401,202 claims as being valid;
- of these 358,129 are being paid 4.3% of their assessed compensation value;
- the remaining 43,073 also owed a balance on a loan to wonga, so their compensation has been used to clear or reduce that balance.
Details on the Administration
Wonga stopped lending and went into administration on 30 August 2018, unable to pay refunds on all the payday loan affordability complaints it was getting.
The Administrators have made various progress reports (available from Companies House) and statements during 2018-19:
- in October 2018, the Administrators published their Proposals, detailing how they planned to handle the administration. Creditors voted to approve these Proposals.
- progress report to end February 2019;
- Witness Statement in April 2019;
- progress report to end August 2019.
An online claim page was set up in April 2019 for Wonga customers to submit claims for refunds. The deadline for sending in a claim was 30 September.
The Administrators assessed all claims using an automated tool. This took account of:
- all loans, including those over 6 years old
- how large a loan was compared to a customer’s income;
- how often someone borrowed without significant gaps;
- whether there were indications of hardship such as missed payments;
- if there is a balance outstanding for the right of set-off.
Where it decided one or more loans were unaffordable, it calculated how much interest should be refunded and added statutory interest at 8%.
In August 2019 the Administrators starting sending emails to people saying whether their claims have been successful or rejected.
In September, the Administrators sent an update on progress up to end August 2019. Key points include:
- at end August, 389,621 claims for unaffordable payday lending have been accepted by the administrators;
- the total value of these claims is c £460million – an average of c £1,200 a claim. (My comment: £460m is a lot more than the £45million which the Wonga directors had estimated);
- £23m of outstanding loans have been collected. The Administrators say that outstanding loans are being taken into account and given the right of set-off where the customer has a claim for unaffordable loans. The remaining loan book will not be sold to a debt collector.
The Administrators expected that payments would be made by 30 January 2020.
Some people still owe Wonga money. At the moment it is not known what will happen to these balances as the Administrators are no longer taking payments and have said before that they are not likely to sell the loans to a debt collector.
On 10 January the Administrators sent out confirmation emails with people’s bank accounts.
On 29 January the administrators announced the dividend of 4.3p in the £