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14/09/2012
Wonga Defending Loan Policy Amid Increasing Cases Of Fraud
After a number of fraud allegations, payday loan company Wonga has defended the way it carries out fraud checks
Consumers who despite having never taken out a loan with the company found their bank accounts had been used to repay loans.
The lender, which offers loans of between £400 and £1,000 on a short-term basis at a cost of more than 4,000% APR, makes a virtue of the fact it can turn around applications in just 15 minutes.
However, victims say it takes much longer to get a response from the company when things go wrong, and have questioned whether the speed of approvals and the way loans are set up make it a soft target for fraudsters.
When a loan is taken out from a traditional lender or credit card provider, the borrower will give current account details for the loan to be paid into. A direct debit is also set up to make repayments: the debit is normally deducted from the same account that receives the loan money. Some banks, including HSBC, insist this is the case.
With Wonga and other payday loans a debit card is given for repayments, and the borrower grants the lender continuous payment authority, which allows them to take payments at any time during the month. It is less obvious whether this card is linked to the account receiving the money, although Wonga said it does require both accounts to be held in the same name.
One major bank said it had seen a "significant increase" in fraud by criminals using Wonga over the past six to nine months, albeit from a low base, while BBC consumer affairs programme Watchdog said it had been contacted by 40 people who had fallen victim to various types of fraud involving Wonga accounts.
One victim said she knew nothing about the fraud until she spotted two debits to Wonga from her HSBC current account. On each occasion about £500 was debited.
In a statement Wonga said: "We take every case of fraud seriously and have every sympathy for the victims of identity theft. Our automated technology is at the cutting-edge of screening out fraud and we achieve roughly a tenth of the fraud levels seen by the rest of the e-commerce sector.
"On the rare instances our advanced security systems are bypassed by criminals, we always ensure our customers are left without any liability and we work with the police to ensure cases are fully investigated."
(H)
Consumers who despite having never taken out a loan with the company found their bank accounts had been used to repay loans.
The lender, which offers loans of between £400 and £1,000 on a short-term basis at a cost of more than 4,000% APR, makes a virtue of the fact it can turn around applications in just 15 minutes.
However, victims say it takes much longer to get a response from the company when things go wrong, and have questioned whether the speed of approvals and the way loans are set up make it a soft target for fraudsters.
When a loan is taken out from a traditional lender or credit card provider, the borrower will give current account details for the loan to be paid into. A direct debit is also set up to make repayments: the debit is normally deducted from the same account that receives the loan money. Some banks, including HSBC, insist this is the case.
With Wonga and other payday loans a debit card is given for repayments, and the borrower grants the lender continuous payment authority, which allows them to take payments at any time during the month. It is less obvious whether this card is linked to the account receiving the money, although Wonga said it does require both accounts to be held in the same name.
One major bank said it had seen a "significant increase" in fraud by criminals using Wonga over the past six to nine months, albeit from a low base, while BBC consumer affairs programme Watchdog said it had been contacted by 40 people who had fallen victim to various types of fraud involving Wonga accounts.
One victim said she knew nothing about the fraud until she spotted two debits to Wonga from her HSBC current account. On each occasion about £500 was debited.
In a statement Wonga said: "We take every case of fraud seriously and have every sympathy for the victims of identity theft. Our automated technology is at the cutting-edge of screening out fraud and we achieve roughly a tenth of the fraud levels seen by the rest of the e-commerce sector.
"On the rare instances our advanced security systems are bypassed by criminals, we always ensure our customers are left without any liability and we work with the police to ensure cases are fully investigated."
(H)
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