UK payday lender Wonga has been forced to pay out a cool £2.6m ($4.4m) to its customers after it was found to have falsified debt collections letters.

The company, which the Church of England "accidentally" invested in, will have to pay out to 45,000 customers it wrote to demanding repayment of loans from fictional law firms.

In some instances Wonga also added charges to customers’ accounts to cover the administration fees associated with sending the letters.

Kerry Bland, a director for Jack Russell Collections Agency told RBI: "The actions of Wonga in this case are extremely deceitful and
According to Bland Wonga are not the only firm to use these tactics in attempts to recover loans.

"Companies will create a legal sounding name to make people think the recovery has been passed on."

"It would have very simple for Wonga to set up a company with one of the names used which would be a completely legitimate way to go about this."

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It would also have been an option for Wonga to partner with a debt collection company and use its name as part of the recovery process. Companies often do this prior to selling on debt.

The lender, which has been chipping away at traditional banks’ market share, also admitted that system errors resulted in 200,000 customers overpaying for their loan and an even larger undisclosed number underpaying.

An IT error of this size is a heavy blow to the firm as it is able to out manoeuvre traditional banks which are heavily restricted by dated legacy systems.

Clive Adamson, director of supervision at the FCA, said: "Wonga’s misconduct was very serious because it had the effect of exacerbating an already difficult situation for customers in arrears. We are pleased that Wonga has been working with us to put matters right for its customers and to ensure that these historical practices are truly a thing of the past.

"The FCA expects firms to pay particular attention to fair treatment of those who have difficulty in meeting their loan repayments."
The FCA has ruled that between October 2008 and November 2010 Wonga used unfair debt collection practices which put customers under great pressure to make loan repayments that many could not afford.

Using the names of non-existent law firms Chainey, D’Amato & Shannon, and Barker and Lowe Legal Recoveries, customers were lead to believe that their outstanding debt had been passed to a law firm, or other third party.

Further legal action was threatened if the debt was not repaid.

Tim Weller, interim Wonga chief executive, said: "We would like to apologise unreservedly to anyone affected by the historical debt collection activity and for any distress caused as a result. The practice was unacceptable and we voluntarily ceased it nearly four years ago."