Administrators for payday lender Wonga, which collapsed this year on the back of compensation claims for mis-sold loans, plan to automate the decision process of judging which claims are valid.
According to The Guardian, accounting firm Grant Thornton plans to create a tool that will decide which claims to pay out on, saving on the costs of manual processing.
The automated process will be ‘aligned as closely as possible' to that used by the Financial Ombudsman Service (FOS), the administrators said. However, the decision has attracted criticism from campaigners and politicians.
Labour MP Stella Creasy said, "There is a very real risk those who are owed money by Wonga in compensation for having been lent money irresponsibly may be chased by creditors for this money, whilst losing access to the compensation to which they are entitled.
"It's time the government stepped in to oversee this process to ensure this legal loan shark doesn't keep ripping off customers even after its demise."
Wonga was regularly pulled up by regulators before its demise. Its interest rates had been known to exceed 5,800 per cent before ministers capped them in 2015 (after which they only reached a measly 1,500 per cent). Ironically, many of its mis-sold loans were based on decisions made by automated software.
"Just as Wonga's algorithms failed to account for individual circumstances when making loans in the first place, there are risks that this technology will again fail to take all the relevant factors into account when processing claims, leaving many customers out of pocket," said David Clarke, head of policy at financial campaign group Positive Money.
Wonga faced more than 24,000 complaints from customers when it collapsed, and the administrators continue to receive between 200 and 500 claims every day.
A spokesperson for Grant Thornton told The Guardian: "The joint administrators have issued their initial proposals to the companies' creditors on the progress of the administration. The proposals are currently being considered by the creditors, who have until 9 November 2018 to offer views and include updates on the trading conditions of the companies and details on other material financial matters.
"The administrators are continuing to conduct an orderly wind-down of the business in accordance with their statutory obligations and continue to work closely with the Financial Conduct Authority."
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