The infamous Wonga letters have highlighted similar practices by larger companies.
The infamous Wonga letters have highlighted similar practices by larger companies
News has circulated today and yesterday evening that the chairman of the Treasury Select Committee, Andrew Tyrie, has written to several banks demanding an explanation as to why they have been using fake legal firm letters to customers requesting answers on late repayments for loans.
Lloyds Bank is the latest in a long line of banks that has resorted to the use of such ‘firms’, this time with a made-up company called SCM Solicitors, purportedly based in Hove, East Sussex.
Questioned on it, the chief executive Antonio Horta-Osorio, told Mr Tyrie that they had used the name of this company because customers in financial difficulties were not responding to letters from the bank itself.
Today Martin Wheatley, the chief executive of the Financial Conduct Authority, in the regulator’s first annual public meeting, said the issue of legal letters is something that is taken very seriously and will immediately receive considerable attention.
What is very interesting is the way in which Wheatley framed the issue. After being raised by a member of the meeting’s audience, Wheatley said that after the recent Wonga letter scandal, which found that the controversial payday loans firm had regularly used a fake legal company to intimidate customers to pay back loans, “it has become apparent” that other financial providers are doing the same.
It won’t surprise many people to learn that Wonga were not the first to do such a thing, when that news arose a few weeks ago (relating to practices that had occurred from 2008-2010), but the fact that they did has raised a lot of attention to it. On an issue that has slipped under the radar for so long, the outcry over Wonga was a fork in the road moment for regulators.
So for example, the Bank of Scotland had formerly used the name ‘Blair Oliver and Scott’ on letters pretending to be from legal firms to pressure customers, while Scottish Power/Manweb used SPM Collections.
Nicholas Wilson, who describes himself as an activist and whistleblower and is currently taking out a private prosecution against HSBC for conspiracy to defraud, has regularly called out the bank for using a firm called DG Solicitors to pressure customers. An example letter can be found on his website.
Late in June, Wilson wrote a blog post saying how he was asked to write about the fake legal letters from Wonga and described it as difficult since, in his words, “HFC Bank [HFC Bank Limited and HSBC Bank plc are both members of the same group of companies] were doing far worse for about thirty years … The media ignore the story”.
My argument regarding this issue, of whether to concentrate on mainstream finance and ignore small finance companies like Wonga, has always been the same: never ignore the smaller companies, since they can be every bit as bad and even worse.
Indeed, what Martin Wheatley’s words today show – that the Wonga letters have highlighted similar practices by other, larger companies – is that for better or for worse the Wonga scandal has awoken the regulator to take action more broadly.
To demonstrate what I mean, the Wonga scandal in the media had the following effect: The Daily Record reported on ScottishPower and the Royal Bank of Scotland by saying they had sent out ‘Wonga-style fake lawyers’ letters’. This is Money recently asked ‘Has your bank or utility firm sent you a bullying and mis-leading Wonga-style legal letter to recover debts?’. And The Independent reported on the Student Loans Company frightening students with ‘Wonga-style letters’.
The point here is clear: firms sending out letters from fake legal companies is not new, but it took for something to happen to get it raised at a regulatory level. Equally, some incident involving it needed to take place that stuck in people’s minds.
That’s what the Wonga letters did.
It might seem unfair that the issue has not been given importance before now, but it is something the regulator can no longer sweep under the carpet.
Organisations like Citizens Advice and Which? have previously urged the regulator to act, and today the FCA’s chief executive has addressed the issue in public and stated clearly that he will look into it.
Whether or not he will remains to be seen.
Given the severity of the issue, and the fact that in many instances it amounts to deceit and thus fraud, charities and the public alike should maintain pressure on the regulator to take serious action. What impact those Wonga letters might come to have.
Carl Packman is a contributing editor to Left Foot Forward and the author of Loansharks: The Rise and Rise of Payday Lending
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