Wonga plans to automate compensation claims: will customers lose out?



One of the largest and most well-known lenders in the UK, Wonga, went into administration earlier this year in August, having struggled for a number of years to stay afloat. It is now considering to use an automated system to deal with the influx of compensation claims.


Upon its collapse, it had over 24,000 complaints from customers, not including the 9,500 that were with the Financial Ombudsman Service, nor the average of 200 to 500 claims that have been received on a daily basis since the appointment of administrators on 30th August 2018.


The demise of the company was in part due to a price cap on interest rates, as well as the huge surge in compensation claims regarding mis-sold loans as a result of a clampdown on the payday loan industry, implemented by the UK government.


For example, claims management firms in the last few years have been pursuing Wonga over complaints through going directly to the Financial Ombudsman Service, as a result of the government clampdown.


One company alone, Payday Refunds, revealed earlier this year to The Guardian that it had entered a staggering 8,000 claims against Wonga in just a matter of months. This wave of complaints and compensation claims in recent months ended up costing the company up to £550  to process each and every claim, regardless of whether or not the customer’s claim was upheld.


Now that the company has gone into administration, it has been revealed by the accounting firm who is dealing with the fall out of Wonga that there are plans to automate its compensation claims process. Campaigners fear that this could lead to customers of Wonga to lose out. But why is that the case?


The plans to create an ‘adjudication tool’ , i.e. a computer based tool to deal with the thousands of compensation claims that remain outstanding, as a way of cutting the costs involved with manual processing, is the main issue. If this is implemented, it would mean that cases will be judged by an automated system. That could mean that the technology fails to take into account all the relevant factors involved with each individual case, meaning that a number of customers may end up losing money, even if they are in fact entitled to compensation.


As the rise of compensation claims continues, high cost lenders are slowly moving towards an payday loan alternative model which extends credit beyond 30 days to offer 6,12 and 24 month loans, something that has been already been introduced by several lenders in the UK.


What Next?

Recent Articles