Payday lender company Wonga raided a 15-year-old schoolboy’s bank account after it allowed criminals to take out a loan using his details in one of the most serious cases of fraud among hundreds to have plagued the lender.
Legally borrowers must be 18 years old in order to obtain a loan but Wonga failed to check the details of Simon Oliver, now 16, from East Sussex, when they were used by a fraudsters.
The case, highlighted in a report by BBC Watchdog last night, echoes those reported by This is Money in the past year and brings into question once again the checks Wonga performs before it grants loans.
Wonga fraud victim: Simon Oliver was 15 when Wonga raided his bank account for a loan that he did not take out. He is one of nearly 400 victims reported to BBC Watchdog. A report on the issue is being broadcast at 8pm on BBC One tonight.The first Simon knew of a problem was when he tried to withdraw money during a school trip to Switzerland.
He only found out that he had been a victim of fraud, and that Wonga had taken £260 from his bank account to reclaim the debt, when he returned home.
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'I can’t currently drive, nor can I buy alcohol nor can I even vote, so the fact that I would even have a loan is completely absurd.'
'My bank dealt with the issue quickly and I was refunded the money.'
Last month This is Money reported on the cases of 41 victims of Wonga fraud. Readers had amounts ranging from £100 to £6,000 fraudulently taken from their bank accounts.
Watchdog said it has seen 398 such cases, with a total of £150,000 being taken incorrectly from viewers. The Police confirmed to the programme that it would now investigate the claims.
Need for speed: Wonga's website states that potential customers are 'six minutes away from a decision' on a loan- the BBC Watchdog programme will question if this is enough time to carry out relevant security and identity checks.Cases typically involve victims’ names and addresses being used to set up the loans. Fraudsters draw the money into a bank account they can access and then input bank account details stolen from innocent victims as a repayment method on the loan. This means that when Wonga chases the debt it takes the money from an unknowing victim.
Wonga’s website states that potential customers are 'six minutes away from a decision' on a loan – the BBC Watchdog programme will question if this is enough time to carry out relevant security and identity checks.
Wonga will not specify what identifying details are checked before loans are granted.
HOW WONGA RECOVERS DEBTSWonga uses a common repeat transaction method called a Continuous Payment Authority (CPA) to collect money from borrowers – which is why it takes repeated small payments from customers, adding up to the total of the loan.
When customers take out a Wonga loan they input their bank or card details, in doing so they agree to the CPA. This then allows Wonga to collect the money from their account automatically.
CPAs are also used by companies to collect payments for magazine subscriptions and insurance payments.
It is also reluctant to reveal how many people have been affected by fraud. It previously said that fraud accounts for less than 1 per cent of its loans and that it checks ‘8,000 pieces of credit data’.
In Simon’s case, the fraud appears to have been carried about by the fraudster using Simon’s bank account card details to settle a loan that was taken in someone else’s name. Wonga systems failed to flag up that the accounts were in different names, and therefore a potential fraud risk.
So far, it is unclear whether payday loan frauds like these are reported to the police. Wonga has said that it works proactively with law enforcement to ensure that fraud doesn't occur, but has refused to say if cases have been reported to the police but we were refused.
BBC Watchdog reported that the City of London Police and Action Fraud will now look into the issue after viewing the programme's evidence.
A spokesman from Wonga to BBC Watchdog, said: 'We regret every case of fraud that gets through and, like every major web company, we are committed to cracking down on cyber-crime, which is costing Britain an estimated £27billion a year.
'The unique speed of our lending decisions, which are automated using sophisticated algorithms and thousands of pieces of public data, does not undermine their accuracy and our advanced systems catch the majority of criminal attempts. Unfortunately no solution is 100 per cent fool proof but we are never complacent.'
Fraud: Wonga is reluctant to discuss how many people have been affected by fraud. It previously said that fraud accounts for less than per cent of its loans.Payday loans are designed to be a short term solution to a lack of cash that can be repaid when a borrower's next pay cheque comes through – but they can come at extraordinary costs.
The Financial Ombudsman Service yesterday said that it has seen a 75 per cent increase in the number of complaints it receives about payday loans in the last financial year and that it is a ‘growing area of concern’.
A spokesman said that the complaints were mainly about loan affordability, the way debt is recovered and fraudulent loans.
As part of This is Money’s investigation last month we also passed on details of victims to the Office of Fair Trading in support of their on-going investigation into the payday lending industry.
It has sent letters out to 50 leading payday lenders asking them to completely overhaul the way they run their businesses and is consulting on whether the industry should be referred to the Competition Commission.
A spokesman from the OFT said: 'Lenders should have adequate procedures in place to verify the identities of loan applicants as required. Such procedures reduce the risk that loans are provided as a result of fraudulent applications, as required for anti-money laundering purposes.'
Lender: Wonga will not specify what identifying details are checked before loans are granted.Stella Creasy, Labour MP for Walthamstow, has campaigned against payday lending practices and said that she has personally received 300 complaints from people who have been victims of Wonga fraud.
She said: ‘No wonder the Office of Fair Trading wants to refer all payday lenders to the Competition Commission because of the way they treat the British public and this report is yet more evidence of the poor practises we've been trying to warn the Government about.
'I know from my own postbag just how people are worried as hundreds of people from across Britain are getting in touch for help because they think they've been a victim of fraud using payday lenders.
'That's why the Sharkstoppers campaign has been calling for real-time credit checking to make sure that if people are getting money quickly that it's not ending up in fraudsters pockets.
'Legal loan sharks are out of control in the UK and its time the Government stopped looking after their interests and looked out for us - we need caps and real time credit checks as well as proper penalties for identity fraud urgently to give British consumers the same protection as others around the world enjoy from these firms.'
