Wonga refunds if you still have a loan – the “right of set-off”

Wonga’s administrators have said it is highly unlikely customers will get the full amount of an agreed refund.

Customers who have complained about unaffordable loans and had a refund agreed are now anxiously waiting to know how much they will get back.

But people who owe Wonga money should be in a better position to get compensation than customers whose loans have been settled because of the right of set-off.

The right of set-off

Set-off is common in many situations in English law, including when one of the parties is insolvent, see this legal definition of Set-off.

Simply, if you owe X £700 and X owes you £1,000, set-off lets both debts be settled by X paying you the difference between these amounts, £300.

Set off for Wonga customers

I asked Helen Kavanagh, an independent insolvency lawyer, about this. She said:

Following Wonga going into administration on 31 August, borrowers will still have to carry on repaying their loans to the administrators unless they have already made a successful claim for compensation. In those cases, it should be possible to have their compensation payment set off against their debt. After that, if there is still compensation due to the borrower, they would have to claim for it in the administration. On the other hand, if there is still a balance remaining on the loan due to Wonga this would still have to be paid to the administrators.

This is because of a statutory rule called insolvency set-off. It is mandatory and may not be varied by contract. Where a creditor proves in an administration, an account must be taken of the mutual dealings between the creditor and the company in administration. The sums due from one party must be set off against the sums due from the other. All claims, including future, contingent and unliquidated sums, must be brought into account.

If you owe Wonga money for an outstanding loan, and they owe you money, for example in compensation for unaffordable loans, then it should be possible to use the refund from Wonga to reduce or wipe out the balance you owe.

Two examples of how this may work:

• Where the refund is £1,000 and the balance on the loan is £1,200, the balance would be reduced to £200.
• If the refund was £2,000, this would be enough to clear a balance of £1,200. The £800 remaining refund would then go into the pile of refunds that will be paid, probably only partially, when the administrators know how much money is available to settle them.

So if you have a loan, think if you have grounds to complain

If you feel that Wonga did not check you could afford the repayments before giving you this loan, or previous ones you borrowed, I suggest you should put in a complaint as soon as possible.

The administrators say it is still possible to put in complaints. See the section Haven’t yet made a complaint? in Wonga refunds – latest news for how to do this.

If you only had one loan from Wonga and that is outstanding, the normal compensation for an unaffordable loan is to have the interest removed from the outstanding balance, so you only repay what you borrowed.  And there wouldn’t be a default added to your credit record.

This is worth doing even if the administrators find there is no money to pay any refunds, as the amount you owe Wonga may be reduced.

---