It has been revealed that customers of Wonga, which went into administration in 2018 due to the huge influx of complaints, will receive only 4.3% of the compensation they are entitled to.
400, 000 claimants to receive a minimal payout
The administrators of the collapsed payday lender, have started informing approximately 400,000 people who made a complaint about mis-sold loans that they will not receive full compensation.
Why did Wonga go bust?
Previously the biggest payday lender in the UK, Wonga collapsed under the weight of complaints it received. These complaints were mostly related to customers having been sold a loan they could not afford and came after stricter regulations were implemented by the Financial Conduct Authority (FCA). This crackdown started in 2014, when the FCA discovered that the payday loans giant had lent money to thousands of vulnerable people who would never be able to afford to make loan repayments. This led to a change in lending regulations for the entire payday sector.
How many people are eligible for payday compensation?
Wonga’s administrators state that they have received approximately 380,000 eligible payday compensation claims since the FCA crackdown. It is estimated that these claims are worth a whopping £460m overall, with the average claim being around £1,200.
Claimants feeling ‘let down’ by the small payout
Many ex-customers of Wonga who filed a compensation claim have found the payout an insult. Whilst claimants had been previously told that they would get a lot less than the full compensation amount, not many believed it would be just 4.3% of the total owed.
Payday loans not covered by the Financial Services Compensation Scheme (FSCS)
Unfortunately, what is adding to the blow for payday loan customers who were mis-sold loans is that they will not be covered by the FSCS scheme. The scheme, overseen by the FCA, fully reimburses some insurance and loan products such as those mis-sold payment protection insurance (PPI), but not when it comes to payday loans.
Late compensation payout for Wonga claimants
In addition, Wonga administrators have also stated that these compensation payouts will be made later than expected. Previously, claimants were told they would be paid by 20 January 2020. Now, they can expect to receive a payment in the next four weeks. Loans that were being refunded will also be removed from people’s credit history within the next six weeks.