Month: April 2019

The Toxic Legacy of Wonga Debt on Individuals

Over 40,000 Wonga customers are waiting to find out whether the pay day loans they received were mis-sold following Wonga going into Administration in August 2018. Many of these customers no longer believe that they will receive any form of compensation with the Treasury Committee stating that their claims had been “cast aside”.

This is four times the previous estimate of claimants and is expected to increase further according to Wonga’s Administrators.

We understand that the Administrators will be setting up a portal to allow customers to make claims on line.

Certain customers are using the services of claims management companies but this may not result in these claims being processed more quickly and may also result in customers incurring claims management charges which will be deducted from any compensation received.

Even if claims against Wonga are successful, it is likely that customers will only receive a small fraction of any compensation owing to them from Wonga’s Administrators.

When a short term credit provider like Wonga ceases to trade, there currently is no scheme in place which protects customers for claims they may have against the provider, including compensation if the loan has been mis-sold.

We expect the position of many of Wonga’s customers to worsen in the future given the aggressive nature of the loans provided, with customers still struggling to manage the repayment of excessive interest payments and default charges where loan repayments have fallen into arrears.

The Chair of the Treasury Committee has stated that these customers have “been left to fend for themselves by Wonga, the Financial Conduct Authority (FCA) and the Financial Ombudsman Service. They have been allowed to fall through the cracks with nobody taking responsibility for their mistreatment. If Wonga continues to damage people’s finances from beyond the grave, it may be time for the Government to intervene”.

Wonga’s financial failure resulted from a significant increase in compensation claims from customers who believed that the loans should not have been provided to them in the first place.

Council Tax

More Council Tax Increases for 2019/20

As you will no doubt be aware, Council Tax charges for 2019/20 have again increased.

The average Council Tax increase across Local Authorities in England is 4.5%. This is the second highest increase in a decade (largest increase was last year) with Council Tax payers in some regions now paying annual charges of over £1,800.

The North East of England has seen the largest annual increase of £86.

Council Tax charges in Wales have also risen with certain Local Authorities setting increases of almost 10%.

See how the 2019/20 Council Tax increases affect your region in England.

Average B and D Council Tax bills.

North East £1,844 (up £86)
South West £1,846 (up £81)
East Midlands £1,836 (up £79)
South East £1,814 (up £73)
North West £1,807 (up £80)
East £1,780 (up £71)
Yorkshire & Humber £1,746 (up £75)
West Midlands £1,732 (up £78)
London £1,476 (up £71)

Source: Cipfa survey of local authorities

Since austerity measures were put in place by Central Government, Councils have lost approximately 60% of Government funding since 2010. Some of these Government cuts have resulted in Councils passing these charges onto ordinary Council Tax payers together with general cuts to public services.

The Chief Executive of CIPFA states that these increases are merely reflective of the financial pressure faced by Local Authorities for the provision of public services, including policing.

It is our view that these Council Tax increases and general increases in other household costs will inevitably result in a higher demand for formal insolvency solutions for ordinary tax payers, including Individual Voluntary Arrangements.

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“Free and impartial money advice is provided by the Money Advice Service”

Johnson Geddes is a member firm of and regulated by the Insolvency Practitioners Association

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