As reported by Your Money, in June last year Wonga was fined £2.6m by the Financial Conduct Authority for dispatching repayment demands under the guise of fictitious law firms – in some cases, even adding further charges to customers’ accounts to cover ‘administration fees’ for sending the letters.

Between October 2008 and November 2010, Wonga wrote to over 45,000 letters to its borrowers in arrears using the names Chainey, D’Amato & Shannon and Barker and Lowe Legal Recoveries. The FCA ruled that the practice was designed “to maximise collections by unfairly increasing pressure on customers”, as customers were led to believe their outstanding debts had been passed to a law firm. The letters threatened legal action was threatened if the debt was not repaid.

After action by the FCA to secure compensation for the affected customers, the matter was referred to the City of London police to see if the firm should face a criminal investigation for fraud.

Police have now decided that there are insufficient grounds for action. They confirmed that, with the exception of some of the earliest versions of the letters, most correspondence had indicated somewhere in the small print that they had originated from Wonga.

The police said in a statement: “The central allegations were that Wonga had deceived its customers by sending letters falsely purporting to be from lawyers with the aim of recovering outstanding debts from customers.

“After a thorough review of all the material gathered the City of London Police has concluded there is not sufficient evidence to progress a criminal investigation.”

Talks between regulators and the police began in 2012 when problems with Wonga’s debt collection practices had been uncovered by the Office of Fair Trading. At that point the decision was taken that the OFT would continue its work, rather than the case being referred, a decision the police said was made with “the interests of the consumer being at the fore”.

The police’s recent involvement in the case followed intense pressure for action – including from the head of the Law Society, Desmond Hudson, who said Wonga’s “dishonest activity” could amount to blackmail and deception.

The latest customer update on Wonga’s website reads: “All customers affected by the historical debt collection issue have now been contacted by us, and the majority have already received details of their compensation.

“We are working hard to send a compensation offer to all remaining affected customers by the end of February 2015.”