Wonga leaves dozens of victims without answers after it raids bank accounts for £30,000 to recover loans made by fraudsters
Dozens of fraud victims who had Wonga loans taken in their names and saw their bank accounts raided for more than £30,000 have been met with a wall of silence by the lender.
This is Money has been investigating fraudulent loans taken through Wonga after it was contacted for help on 41 similar cases - but the payday lender refuses to explain how and why the fraud is occurring, or to provide proof that cases have been reported to the police.
Details of the victims have now been passed to the Office of Fair Trading and officials are now looking at the cases as part of their on-going investigation into the payday lending industry.
Steady stream: A total of 41 readers have emailed This is Money about Wonga fraud.Of most concern is how fraudsters manage to cash in on loans that someone else ends up responsible for, how loans are granted with seemingly minimal personal details and whether every case is being officially reported.
Most victims only became aware of the fraud when the payday lender raided their bank account to make good on its loss.
Payday loans are designed to be a short term solution to a lack of cash that can be repaid when a borrower's next pay cheque comes through – but they can come at extraordinary cost of more than 4,000 per cent APR.
The loans have attracted the attention of regulators amid reports of bad practice and loans being granted without proper checks on borrowers' ability to afford repayments. The OFT last week found widespread failures within the industry and issued 50 lenders, including Wonga, with written notice that they have 12 weeks to improve practices or risk losing their credit licence.
Wonga provides short term loans between £1 - £1,000. Its website guarantees cash in your account within 15 minutes, 24-hours a day, if applications are successful.
HOW WONGA RECOVERS DEBTSWonga uses a common repeat transaction method called a Continuous Payment Authority (CPA) to collect money from borrowers – which is why it takes repeated small payments from customers, adding up to the total of the loan.
When customers take out a Wonga loan they input their bank or card details, in doing so they agree to the CPA. This then allows Wonga to collect the money from their account automatically.
CPAs are also used by companies to collect payments for magazine subscriptions and insurance payments.
The cases collected by This is Money typically involve victims’ names and addresses being used to set up the loans. Wonga will not specify what other identifying details are checked before loans are granted.
Fraudsters draw the money into a bank account they can access and then input bank account details stolen from innocent victims as a repayment method on the loan.
This means that when Wonga chases the debt it takes the money from an unknowing victim.
Wonga uses Continuous Payment Authority (CPA) to recover payments from customers, this means it is able to raid the victim's account directly to recover the money. (See box). In a handful of cases victims have received a letter from Wonga chasing debts, but did not have money taken from their bank account.
Of the 41 cases This is Money has handed to the OFT, 33 had money taken directly from their bank account. 27 of these specified the amounts taken, with the total reaching £30,839. Among these, the size of the fraudulent loans averaged £1,142.
Three readers who contacted This is Money had sums of more than £3,000 taken from their accounts. In all cases victims were refunded by Wonga when the fraud was eventually resolved.
Acknowledging the information provided by This is Money, a spokesman for the OFT said: 'Lenders should have adequate procedures in place to verify the identities of loan applicants as required. Such procedures reduce the risk that loans are provided as a result of fraudulent applications, as required for anti-money laundering purposes.'
'I can’t put into polite words what I think of them’This is Money first covered the issue in August last year when we wrote about the experience of four readers who had Wonga debts taken out in their names. Since then we have received a steady stream of emails from readers with a similar problem.
Victim: Jane Dolby had £5,000 taken out of her account by Wonga as it tried to recover debt for a loan taken out fraudulently.Last week, we were contacted by Jane Dolby who had £5,000 taken from her account by Wonga – the biggest amount taken from a This is Money reader for a fraudulent loan.
50-year-old Jane, who lives in Berkshire, first received a letter from Wonga on Valentine’s Day demanding payment for a loan she had not taken out.
She called the payday lender and was told that she would receive no further letters. Satisfied that Wonga had dealt with the fraud she didn’t take the issue any further.
A week later she checked the joint NatWest bank account she shares with her husband to find that Wonga had taken 13 separate payments over two days totalling £5,000.
The payments had been taken out three days prior to her phone call – something that Wonga failed to spot when she called them. Jane immediately rang Wonga and was told that she needed to contact her bank as she had been a victim of fraud.
Over the next two days she called her bank numerous times and was asked to prove that she has not taken out the loan before her bank would accept it as fraud and refund her the money.
She said: ‘I have just had the worst two days of my life, trying to prove to my bank that I have no relationship with Wonga after £5000 was taken from my debit card over a two day period.
'I had a pretty low opinion of payday loan companies that prey on the vulnerable, fail to carry out proper checks and don’t care, I can’t put into polite words what I think of them now.’
BIT OF A BOOBOne of the victims was amused when he received letters from Wonga demanding payment for a loan taken out in the name Mrs Katie Price…it wasn’t so funny when £1,600 disappeared from his account after Wonga wrongly took payment for the fraudulent debt.
Wonga's wall of silenceWe have attempted to get answers from Wonga on how loans like the one taken in Jane's name are granted.
In particular we wanted to know how debts of such large amounts can be built up before Wonga acts.
There is also a crucial question surrounding how this money is being taken out of the system and whether criminals are being traced. After all, while fraudsters game the system to put in someone else's bank account for payment details, the victims are never actually seeing the proceeds of the loans. But that money must be going somewhere, to then be withdrawn and that should be traceable.
Readers also tell us that they are told they are not the victim, Wonga is, and therefore they cannot report their case to the police. We have asked Wonga for proof fraud is being officially reported and pursued.
We have asked Wonga if they can provide this information on a 'not for publication' basis so that we can avoid copycat fraudsters picking up tricks on how to carry out the offense.
Wonga has told This is Money that fraud accounts for just 0.01 per cent of the loans that it issues. It has quoted this previously and we requested an updated figure in light of the sharp increase in payday lending in recent years, but Wonga refused.
It has also said that it will only lend £400 to first-time customers and that one loan can only be 'rolled over' three times.
Payday lenders roll over loans when debtors cannot repay their whole loan in the agreed period - usually 30 days. Lenders arrange a new loan for the unpaid amount, plus interest, with a repayment date set 30 days from the start of the new loan. It means an original loan of £400 could more than double in the the space of just a few months.
Repeat borrowers are not restricted to £400 and can potentially borrow up to £1,000 with each new loan.
TAKING ONE FOR THE TEAMVictim: Banking correspondent Lee Boyce has also received a letter from Wonga chasing debts he does not owe.
Among the emails that we have collected from readers and passed on to the OFT we also included information from This is Money’s banking correspondent Lee Boyce.
On Christmas Eve Lee opened a letter from Wonga chasing him for debt on a fraudulent loan that he had not taken out.
When he asked the Wonga press office for an explanation he was told he had been a victim of ID fraud.
The Wonga press office refused to elaborate any further despite multiple requests. He also sent a request to Information Commissioners Office which was refused
A key criticism the OFT has made of payday lenders is that firms are not conducting adequate assessments of applicants to see if they can afford loans before lending or rolling over a loan.
In guidance issued last week, the OFT said: 'Although most lenders ask for a bank statement, this appears to be mainly to validate employment or the existence of a bank account or for fraud checking purposes, rather than to assess affordability. Lenders rarely asked for more than one month’s statements.'
Wonga has claimed in the past to check 8,000 pieces of data about applicants before granting loans. But it refused to say if it checked details of applicants income and their ability to repay a loan, as happens with traditional bank loans, when they first apply, or when roll-overs are agreed.
It also would not say if it passes details of loan applicants to credit reference agencies so that other lenders have complete knowledge of a borrower's debts.
Wonga has said that it works proactively with law enforcement to ensure that fraud doesn't occur. We asked Wonga for for confirmation that instances of fraud have been reported to the police but we were refused.
In an email to This is Money, Damian Peachey, from Wonga, said: 'While we’ll always be happy to address new questions where we can, and look at any customer queries that you pass on, there are only so many times we can go over the same ground or provide official comment on the same subject.
'We therefore don’t intend to provide yet more detailed responses or comments in response to this particular enquiry, or indeed future enquiries of this nature.’
