LONDON (Reuters) – British lawmakers have called for better access to compensation for consumers when finance firms collapse, after unresolved complaints against failed payday lender Wonga hit 40,000.
Wonga was Britain’s largest provider of short-term, high-interest loans before going into administration last August.
The firm’s demise left thousands of customers with mis-selling claims against the company unresolved, with an initial estimate by regulators putting the number of open complaints at 10,500.
Wonga’s administrator Grant Thornton has since told lawmakers the number of redress claims has risen to “more than four times” the initial estimate, in correspondence published by Parliament’s Treasury Select Committee on Tuesday.
The Financial Conduct Authority has said these claims were no longer eligible for compensation under its various complaint schemes as they did not cover high-cost short-term credit or firms that had collapsed.
Claimants will have to wait for the administration process to progress to find out what share of Wonga’s assets they may be entitled to if any.
“This problem is clearly much bigger than expected,” Nicky Morgan, chair of the Treasury Committee, said in a statement on Tuesday.
“This issue raises questions about whether the coverage of the Financial Services Compensation Scheme should be widened.”
The FCA had capped interest charges in the payday lending sector to protect consumers, but this increased pressure on the business models of lenders, including Wonga.
Grant Thornton said it would set up an online portal for customers to make claims directly online, although gave no go-live date.
It advised customers to not use a claims management company, arguing this would not speed up the claims process and could result in fees being deducted from any payout.