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You can find the current article at its original source at http://www.guardian.co.uk/money/2012/sep/14/wonga-defends-loans-process-fraudulent-repayments
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| Wonga defends loans process after spate of fraud cases | Wonga defends loans process after spate of fraud cases |
| (7 months later) | |
| Payday lender Wonga has defended the way it carries out fraud checks after a spate of incidents in which consumers found their bank accounts had been used to repay loans taken out by criminals. | Payday lender Wonga has defended the way it carries out fraud checks after a spate of incidents in which consumers found their bank accounts had been used to repay loans taken out by criminals. |
| 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. | 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. | 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. | 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. | 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 victim, Nadia Mounsey, 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. | One victim, Nadia Mounsey, 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. |
| Another victim, John Young, told us he became aware that his Bank of Scotland account details had been given to Wonga for repayments when he received an automated phone call from his bank asking to verify seven payments totalling £765 made on his debit card. | Another victim, John Young, told us he became aware that his Bank of Scotland account details had been given to Wonga for repayments when he received an automated phone call from his bank asking to verify seven payments totalling £765 made on his debit card. |
| His sister fell victim to a separate fraud, which she discovered when she received a letter from Wonga demanding payment for a loan she never had. None of the victims had ever taken out a Wonga loan. | His sister fell victim to a separate fraud, which she discovered when she received a letter from Wonga demanding payment for a loan she never had. None of the victims had ever taken out a Wonga loan. |
| 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 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. |
| Some of the viewers had taken loans with the lender before, and suddenly received letters several months later about new amounts that had been borrowed and paid into different accounts. Others had never had dealings with the firm. | Some of the viewers had taken loans with the lender before, and suddenly received letters several months later about new amounts that had been borrowed and paid into different accounts. Others had never had dealings with the firm. |
| Wonga denies it is more susceptible to fraud than traditional lenders, saying it doesn't allow loans to be repaid from accounts not held in the borrower's name. It added that the cases brought to the Guardian were instances of identity fraud, which it said were not unique to Wonga. | Wonga denies it is more susceptible to fraud than traditional lenders, saying it doesn't allow loans to be repaid from accounts not held in the borrower's name. It added that the cases brought to the Guardian were instances of identity fraud, which it said were not unique to Wonga. |
| However, its website suggests that it does allow repayments by a third party in some cases. In the help section it says: "You can have someone make a payment on your behalf. You need to call our customer service team and have the card holder present so they can give authorisation to use their card." | However, its website suggests that it does allow repayments by a third party in some cases. In the help section it says: "You can have someone make a payment on your behalf. You need to call our customer service team and have the card holder present so they can give authorisation to use their card." |
| Figures from credit referencing agency Experian suggest fraud rates at Wonga are double the level seen on traditional unsecured loans. While Wonga says fewer than 0.1% of its approved loans are confirmed as fraudulent, Experian's figures show 0.05% of unsecured loans – or five in every 10,000 – are found to be taken fraudulently. | Figures from credit referencing agency Experian suggest fraud rates at Wonga are double the level seen on traditional unsecured loans. While Wonga says fewer than 0.1% of its approved loans are confirmed as fraudulent, Experian's figures show 0.05% of unsecured loans – or five in every 10,000 – are found to be taken fraudulently. |
| The figures do not include payday loans but, like Wonga's, do include "first party" fraud where a borrower uses their own account details but lies about some aspect of their circumstances to secure the loan. | The figures do not include payday loans but, like Wonga's, do include "first party" fraud where a borrower uses their own account details but lies about some aspect of their circumstances to secure the loan. |
| According to Experian, fraudulent applications for credit cards is higher at 0.14%. | According to Experian, fraudulent applications for credit cards is higher at 0.14%. |
| Wonga said it had "a zero tolerance policy on fraud", and that cases of criminals targeting it were "extremely rare". | Wonga said it had "a zero tolerance policy on fraud", and that cases of criminals targeting it were "extremely rare". |
| In a statement it 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. | In a statement it 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." | "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." |
| In August, payday lender MCO Capital had its credit licence revoked by the Office of Fair Trading (OFT) for failing to check the identity of borrowers and allowing fraudsters to use the personal details of more than 7,000 individuals successfully to apply for loans. | In August, payday lender MCO Capital had its credit licence revoked by the Office of Fair Trading (OFT) for failing to check the identity of borrowers and allowing fraudsters to use the personal details of more than 7,000 individuals successfully to apply for loans. |
| The OFT said it was aware of cases involving Wonga, but was not able to comment on individual companies. | The OFT said it was aware of cases involving Wonga, but was not able to comment on individual companies. |
| Mounsey said that although her bank had refunded her within two weeks for the transactions, the incident had caused her inconvenience. | Mounsey said that although her bank had refunded her within two weeks for the transactions, the incident had caused her inconvenience. |
| "I was left without a debit card for five days while it was replaced, and I incurred two overdraft fees as a result of the payments going out just before I was paid, although these have since been refunded," she said. | "I was left without a debit card for five days while it was replaced, and I incurred two overdraft fees as a result of the payments going out just before I was paid, although these have since been refunded," she said. |
| "As my name and address weren't used to take out the loan it hasn't affected my credit rating, which is a relief, but it could easily have gone unnoticed had I not checked my bank statement." | "As my name and address weren't used to take out the loan it hasn't affected my credit rating, which is a relief, but it could easily have gone unnoticed had I not checked my bank statement." |
| She didn't bother reporting the fraud to Wonga. "It's extremely easy to take out a loan, yet it's impossible to find any contact details on their website," she said. | She didn't bother reporting the fraud to Wonga. "It's extremely easy to take out a loan, yet it's impossible to find any contact details on their website," she said. |
| Young, meanwhile, said he had tried to contact Wonga "as I wanted assurances they would give all the info they had to the police, and because their business methods facilitated this fraud". | Young, meanwhile, said he had tried to contact Wonga "as I wanted assurances they would give all the info they had to the police, and because their business methods facilitated this fraud". |
| He added: "I was told that their fraud department could not be contacted by phone, and that I had to provide an email address before it would even be reported to them. I was told that 'my' account was now blocked. I told them not to call it 'my' account as it wasn't mine. They told me someone would be in touch in 24-48 hours. I am still waiting." | He added: "I was told that their fraud department could not be contacted by phone, and that I had to provide an email address before it would even be reported to them. I was told that 'my' account was now blocked. I told them not to call it 'my' account as it wasn't mine. They told me someone would be in touch in 24-48 hours. I am still waiting." |
| A spokesman for HSBC said: "We have seen an increase in this type of fraud from Wonga, which we think is largely because they allow customers to receive their loan into a different account to the one they have designated to collect repayments from. | A spokesman for HSBC said: "We have seen an increase in this type of fraud from Wonga, which we think is largely because they allow customers to receive their loan into a different account to the one they have designated to collect repayments from. |
| "Although we can't comment on behalf of Wonga, it has its own fraud department and we expect they will be looking to minimise this type of criminal activity. As an unsecured lender it is liable for this type of fraud – our defrauded customers have chargeback rights for any losses they face." | "Although we can't comment on behalf of Wonga, it has its own fraud department and we expect they will be looking to minimise this type of criminal activity. As an unsecured lender it is liable for this type of fraud – our defrauded customers have chargeback rights for any losses they face." |
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