Comment: Wonga and the watchdog | RBS work goes on

PAYDAY lenders have already ruffled a few feathers and after yesterday’s ruling against Wonga they have probably lost a few more friends.

Terry Murden. Picture: Julie Bull

Thanks to its television adverts featuring a group of excitable puppet geriatrics the company is probably the best known of the sector’s main players, but it continues to attract the wrong sort of publicity.

Sky-high interest rates have received a lot of attention and this month Hearts Football Club decided not to renew its shirt-sponsorship ties with the company.

Yesterday the Financial Conduct Authority (FCA) ordered Wonga to compensate thousands of customers who received fake letters threatening legal action to those in arrears.

Even so, the company was seen to be getting off lightly. Despite sending out these letters from bogus law firms, the firm escaped a fine for reasons that only the legislators can explain.

It was the Office of Fair Trading that began the investigation, but the FCA, its successor for control of consumer credit companies, was not empowered to apply penalties retrospectively.

Aside from the FCA’s inability to act, critics of the handling of this case are asking why the OFT did not do so before it was wound up this year. The outcome is unacceptable as Wonga is effectively avoiding punishment for a serious breach of public trust. Those who use its services already include people coping with the anxiety of low incomes. Those who struggle to repay their loans suffer an added level of stress. To put them under more pressure to clear their arrears by inventing law firms threatening legal action beggars belief. It must rank highly in the league table of disreputable behaviour.

The FCA was brought into being as part of a shake-up in the regulatory environment, supposedly to resolve the shortcomings of the previous regime. It cannot be blamed for the way it has handled this case because its hands were tied. But those who drew up the new regulatory rules have not exactly given the new set-up the sort of start it needed.

The good times of RBS’s bad old days

There were few fireworks at yesterday’s Royal Bank of Scotland annual meeting compared with the fiery events of recent years, although shareholders were left in no doubt that the restructuring work goes on.

The board was also reminded that those same shareholders remain unhappy at continued weak performance and wonder if there really is light at the end of what has proved to be a very long tunnel.

Chairman Sir Philip Hampton must worry every time he takes a call from one of his senior lieutenants that they are about to reveal more horror stories and he must be wearied by the need for regular apologies for the bank’s shortcomings.

It is not all bad, of course. The balance sheet is being cleaned up and chief executive Ross McEwan is making a determined effort to make RBS customer friendly.

However, those customers and shareholders want to see words turned into action and a bank that is back to full health. Let’s not forget that while demonising the previous management it was that same management that reported record profits in successive years leading up to the crash in 2008. RBS was one of the world’s biggest companies and one of the best dividend payers among Britain’s top companies.

Sometimes the bad old days don’t seem so bad at all.