Wonga served with compliance notice

By on August 6, 2014

South Africa’s credit regulator has ordered “fast little loans” lender Wonga to improve its compliance, after it was revealed the company did not verify the income of its customers, writes Krysia Gaweda. The National Credit Regulator (NCR) issued a Compliance Notice to Wonga Finance SA (PTY) Ltd for breach of the National Credit Act 34 of 2005. Following this, the NCR conducted an investigation into the allegations and concerns about Wonga. The investigation revealed that Wonga failed to obtain proof of consumers’ income and living expenses when they applied for loans. Furthermore, Wonga does not require consumers to provide supporting information or documentation to verify their income and household expenses in order to determine the consumers’ ability to repay the credit applied for. It was also revealed that the consents to judgments issued by and/or on behalf of Wonga to consumers contain a clause which expresses, on behalf

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of consumers, consent to the jurisdiction of a court seated outside the area of jurisdiction of a court having concurrent jurisdiction. Wonga also does not maintain or keep record of documentations in support of affordability assessments as well as the steps taken after default by consumers for the prescribed period of three years, making it impossible for debt counsellors investigating reckless credit to determine whether Wonga believed the consumer could afford the loan or not. However, this too works against Wonga as it points towards possible reckless credit granting and is thus in contravention of the requirement of the National Credit Advisor (NCA). After discovering such findings, the NCR ordered Wonga to submit audit reports to confirm that they have implemented the correct systems and procedures to comply with the National Credit Act. The notice also requires Wonga to remove adverse credit bureau listings recorded on consumers’ credit records at its own expense as well as requiring the short-term lender to rescind judgments taken against consumers on loans where Wonga had not obtained proof of consumers’ income and living expenses. In response, the NCR’s company secretary, Lesiba Mashapa, warned that if Wonga did not comply with these requirements by the end of the month (August) the company would be referred to the Competition Tribunal. South African founders, Errol Damelin and Jonty Hurwitz, first launched Wonga in 2007 in the United Kingdom. South Africa is the businesses first expansion outside of the UK. Damelin recently stood down as a Director, and Hurwitz cut his ties in 2011.

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