Have Wonga commited a criminal offence?

Wonga.com_company_logo

Introduction

You may know Wonga from their cheery TV ads featuring knitted OAPs. Hopefully you don’t know them from borrowing money off them, given that their APR gets up to 5853%. They offer payday loans at huge interest rates. Whilst it may not be part of their official stchick, there is a general view that they target people who are the most vulnerable and cannot access finance from more mainstream financial institutions.

Well, on 25th June 2014 they got into a bit of trouble with the Financial Conduct Authority (‘FCA’) for sending letters who were in arrears with their payments from organisations that appeared to be solicitor firms. The names included “Chainey, D’Amato & Shannon” and “Barker and Lowe Legal Recoveries”. According to the BBC,  “The plan was to make customers in arrears believe that their outstanding debt had been passed to a law firm, with legal action threatened if the debt was not paid.” To make matters worse, “In some cases Wonga added fees for these letters to customers’ accounts.

You can read the FCA report here in full. They have given Wonga a firm rap round the knuckles and directed that the people affected be compensated to the tune of £2.6 million.

This is all a bit embarrassing  for Wonga, but is it more than that? As Stella Creasy, the MP for Walthamstow asked on twitter :

 

.

So. Are there any criminal offences here?

 

Possible Offences

Fraud

The Fraud Act is always a good start. What about s2 – Fraud by False Representation? Someone commits fraud if they dishonestly make a false representation, intending to make a gain for themselves or cause a loss to another, when they know that the representation is false and misleading.

Looking at that, under s2(5) “For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention)“. It is probable that a headed paper implying that a letter comes from a law firm is a false representation, so we can tick that box.

What about the fact that, under the contract with the customer, they were owed the money? There is a very wide definition of ‘gain’ and ‘loss’ in s5. It is likely that this would fall into the section, with the safety valve being the requirement of dishonesty. For that reason, subject to the question of whether Wonga were being dishonest, this offence would appear to be committed.

 

Impersonating a solicitor

There are two possible offences here. Firstly, under the Solicitors Act 1974. There is an either way offence of acting as a solicitor when not being one (s20), but it is likely that there was nothing done here other than send the letter implying that it was from a lawyer.

It is also an offence (under s21) for someone who “ wilfully pretends to be, or takes or uses any name, title, addition or description implying that he is, qualified or recognised by law as qualified to act as a solicitor“. This is summary only which looks like a problem (as there is normally a six month time limit for bringing proceedings and Wonga’s practice here stopped in 2010).

s26 extends this time period, but not by enough in this case – proceedings in respect of any offence under section 21 may be brought at any time before the expiration of two years from the commission of the offence or six months from its first discovery by the prosecutor, whichever period expires first“.

There is an offence of pretending to be entitled to carry out a reserved activity under s17 Legal Service Act 2007. This can get a bit complex, but it may well apply if the bogus letterhead said, as an example, ‘Commissioner for Oaths’ as oath taking is a reserved activity.

So, although this offence looks good on paper, it’s actually pretty unpromising. A further issue is that whilst pretending to be a solicitor is a criminal offence, stating that someone is a lawyer is not.

 

Blackmail

This is an offence under s21 Theft Act 1968 :

A person is guilty of blackmail if, with a view to gain for himself or another or with intent to cause loss to another, he makes any unwarranted demand with menaces; and for this purpose a demand with menaces is unwarranted unless the person making it does so in the belief—

   (a) that he has reasonable grounds for making the demand; and

   (b) that the use of the menaces is a proper means of reinforcing the demand.

The fact that Wonga is entitled, under the general law of contract, to the money does not of itself mean that a threat to sue cannot be a ‘menace’ (although it may be hard to persuade a jury of this) or that a threat to sue (especially if it is using a fake law firm) is unwarranted. It is clear that ‘gain’ includes ‘getting money to which you are entitled to’.

So, whilst ‘blackmail’ conjures up connotations of masked men making a ransom demand after a kidnapping, this may well be close.

 

Harassment of Debtors

This is a little known offence under s40 Administration of Justice Act 1970. It is committed when someone:

with the object of coercing another person to pay money claimed from the other as a debt due under a contract, he—

(a) harasses the other with demands for payment which, in respect of their frequency or the manner or occasion of making any such demand, or of any threat or publicity by which any demand is accompanied, are calculated to subject him or members of his family or household to alarm, distress or humiliation;

(b) falsely represents, in relation to the money claimed, that criminal proceedings lie for failure to pay it;

(c) falsely represents himself to be authorised in some official capacity to claim or enforce payment; or

(d) utters a document falsely represented by him to have some official character or purporting to have some official character which he knows it has not.

There is a general defence (s40(3)) if what was done was reasonable. It seems that the case against Wonga under either (c) or (d) is a pretty strong one. The difficulty here is that this offence is also summary only, with no extension period, and so it would appear to be time-barred.

 

Comments

Wonga was never one of those brands that is thought of highly by the public, but this won’t have done anything to help it. Have they broken the law? It’s an interesting question. It is unlikely that the police or CPS would get involved. If Ms Creasy wants to launch a private prosecution however, then she is perfectly entitled to…

 

From the Telegraph

From the Telegraph

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12 thoughts on “Have Wonga commited a criminal offence?

  1. Big Dave

    Well, don’t look too far into who founded and owns Wonga via Monaco and Israel in case it would stir up certain ancient tropes about usury which of course cannot be true. Except in this case.

    Reply
  2. Pingback: Could Wonga executives be prosecuted over fake legal letters? | Political Scrapbook

  3. Andrew

    I would have thought that stating that someone is a lawyer who is not is defamatory. Like saying that someone is an MP who is not!

    Reply
  4. rwendland

    Another possible offence is section 82 of the Companies Act 2006: to send a business letter or other communication without disclosing the registered name of the company sending it, with the company and “every officer of the company who is in default” liable to criminal prosecution. Assuming they did not tuck something like “really from Wonga Group Limited” in the small print of the fake solicitor letters, it seems pretty likely this is a criminal offence that would apply.

    It is a summary offence, but s1128 sets reasonable time limits on prosecution. Three years normally, but longer if:

    (b) within twelve months after the date on which evidence sufficient in the opinion of the Director of Public Prosecutions or the Secretary of State (as the case may be) to justify the proceedings comes to his knowledge.

    which seems like it might well apply.

    To expand on the offence, s82 of the Companies Act 2006 authorises The Companies (Trading Disclosures) Regulations 2008, which states in paragraph 6:

    Registered name to appear in communications

    6. (1) Every company shall disclose its registered name on—

    (a) its business letters, notices and other official publications;

    (g) all other forms of its business correspondence and documentation.

    and paragraph 7 expands on that (company’s registered number, address etc).

    s84 of the Companies Act 2006 and p10 of The Companies (Trading Disclosures) Regulations 2008 define the offence as a fine not exceeding level 3 on the standard scale, plus possibly a daily default fine. Both the company and officers in default may be prosecuted.

    What do you think Dan?

    Reply
    1. rwendland

      Whoops, made a mistake over the time limits on prosecution under s82 Companies Act 2006 – this one looks time-barred as well. Misread an “and” as an “or” in s1128. It’s a 3 year limit, subject also to a 12 month limit after DPP or SoS has sufficient evidence.

      Reply
  5. Felix

    Given the lack of will by our completely impartial CPS, a private criminal prosecution under s. 2 Fraud Act (possibly brought by a limted company set up by a few enthusiasts like myself) would do the job. E/W offence, so no time bar.
    Can anyone see why s.12 Fraud Act should not also be capable of attaching to individual directors and staff, pour encourager les autres?

    Reply
  6. Andrew

    Limited company or not you would have to put up your own costs. And watch out for the abuse of process argument if you were immunising yourself from the risk of adverse costs.

    A fun project to plan, just don’t do it!

    Reply
  7. Quentin Vole

    “they target people who are the most vulnerable and cannot access finance from more mainstream financial institutions”. Anyone who can get a mortgage, a personal loan or even a credit card is extremely unlikely to become a customer of Wonga.

    Reply
  8. rwendland

    Law Society ask Metropolitan Police to investigate today:

    http://www.lawsociety.org.uk/news/press-releases/law-society-calls-for-criminal-investigation-of-wonga/

    “Law Society calls for criminal investigation of Wonga

    … The Law Society has asked the Metropolitan Police to investigate whether the following offences have been committed:

    Obtaining pecuniary advantage by deception and blackmail.
    Offences under section 21 of the Solicitors Act 1974.
    Offences under section 17(1)(a) of the Legal Services Act 2007.”

    Also says “The Solicitors Regulation Authority has been asked by the Law Society to investigate whether there is a case under section 21 of the Solicitors Act 1974 or section 17(1)(a) of the Legal Services Act 2007, with a view to prosecution if the investigation discloses sufficient evidence.” It has asked the FCA to release the copies of the letters and the investigation files.

    The issue certainly has some momentum.

    Reply
  9. Andrew

    On the wider issue of their business model.

    During the passage through Parliament of a Moneylenders Bill a Member posed the question: At what rate of interest would you lend a juicy steak to a hungry dog? They have a high risk of default and their rates reflect that. They are, at any rate, an improvement on the unlegalised sharks whose mode of debt collection is not a dodgy letter but a baseball bat.

    Reply
  10. Pingback: What a load of Wongas | Sometimes, it's just a cigar

  11. Daniel Olive

    A lot of these statute barred offences could still be run against the Student Loans Company, as they were doing this up until the 27th of June this year. They didn’t claim to be a solicitor, and put a tiny “trading name” clause at the bottom, though. The 1970 act could apply though.

    Reply

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