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Wonga, the payday lender that went into administration this August, plans to automate its compensation claims process - sparking fears that customers will lose out. Accounting firm Grant Thornton is in the process of winding up Wonga and is legally obliged to assess the claims of all customers who believe that they have been mis-sold loans.

The Guardian reports that in a bid to cut costs the administrators are creating an automated ‘adjudication tool’ that will decide which claims to pay out on, rather than processing each claim manually.

In its October letter to creditors, Wonga said that it had been receiving roughly 200 to 500 compensation claims every day after it went into administration on 30 August. Before that date the company had received 24,000 complaints from customers and a further 9,500 had been escalated to the Financial Ombudsman Service.

The administrators have disclosed that until the company’s assets are sold it is uncertain how much compensation is available, and when it will be issued.

Direct payday lenders are not covered by the Financial Services Compensation Scheme, so claimants who are rejected by the adjudication tool are left at a loose end.

The decision to automate claims has attracted criticism from politicians and campaigners.

David Clarke, head of policy at financial campaign group Positive Money, warned that automating compensation puts claimants at a disadvantage for the second time. 

“After having been mis-sold loans by automated software, Wonga customers may now be forced to appeal to a similar automated system,” he said.

“Just as Wonga’s algorithms failed to account for individual circumstances when making loans in the first place, there are risks that this technology will again fail to take all the relevant factors into account when processing claims, leaving many customers out of pocket.”

Stella Creasy, Labour MP for Walthamstow and vocal payday lending campaigner also expressed concern, pointing out that customers who lose their claim will still be chased by creditors.

“There is a very real risk those who are owed money by Wonga in compensation for having been lent money irresponsibly may be chased by creditors for this money, whilst losing access to the compensation to which they are entitled,” she said.

“It’s time the government stepped in to oversee this process to ensure this legal loan shark doesn’t keep ripping off customers even after its demise.”

Wonga’s loan book is worth £400 million. At least 60 parties have shown their interest in buying it, with 27 going on to sign non-disclosure agreements in order to pursue the matter further. The buyer of the book would be able to chase its debts without being liable for compensation. 

A spokesperson for Grant Thornton said that the automated process will be ‘aligned as closely as possible’ to the methodology used by the Financial Ombudsman Service. The Financial Conduct Authority has been informed of the plans.

Wonga to automate compensation claims
Digital Mag

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