The pile of compensation claims from customers against Wonga has increased fourfold to more than 40,000 since the controversial payday lender collapsed, according to administrators.
Wonga was placed in administration in August 2018, saying it could not cope financially with more than 10,500 claims registered with the Financial Ombudsman Service at the time.
There are more than four times more submissions from customers who may have been mis-sold loans, after new complaints from claims management companies, administrator Grant Thornton said in a letter to the Treasury select committee on Tuesday.
Dave Dunckley, Grant Thornton’s chief executive, wrote that he expected the total number of complaints to increase further when it writes to all Wonga customers to encourage them to claim if they think they were mis-sold loans.
Dunckley said he was unable to provide details of the proportion of upheld complaints, or the average amount successful claimants will receive. The administrators will issue a report on progress at the end of March.
Grant Thornton is planning to use an automated tool to decide the claims against Wonga, in order to avoid the costs of manually processing each one – which would come out of the final compensation pot. The administrator will launch an online portal for people to register their claims against Wonga once it has completed various legal steps.
The administrators will be able to tell former Wonga customers whether their claim has been successful relatively quickly, but the amount they will receive will not be decided “until all recovery of assets has been made”, Dunckley wrote.
Before its collapse, Wonga was the controversial flag bearer for the British payday loans industry. The firm, founded in 2007, attracted the ire of regulators because of interest rates that reached as high as 5,853% per annum offered to customers.
Regulators eventually cracked down on the sector, introducing a requirement for affordability checks and opening the door to thousands of claims that it mis-sold loans, often to vulnerable customers.
Grant Thornton said it was monitoring potentially vulnerable customers and offering debt management advice.
The large volume of complaints and Wonga’s lack of assets when it went bust mean that claimants are likely to receive far less than their entitlement.
“This problem is clearly much bigger than expected,” said Nicky Morgan, the Conservative MP who chairs the Treasury select committee.
Morgan said: “This issue raises questions about whether the coverage of the Financial Services Compensation Scheme should be widened to provide protection for customers of high-cost short-term lenders and those of firms that later go bust.”
Compensation claimants rank as unsecured creditors in the administration, meaning that bondholders will be paid before those who were mis-sold loans.
In its proposal to shareholders for the administration in October, Grant Thornton said Wonga owed unsecured creditors £83.3m, including at least £45m for those owed compensation.
Dunckley warned customers to avoid using claims management companies, who he said take as much as a third of any compensation award in return for little work.
