Earlier this week, payday lender, Wonga were in talks of being on the brink of collapse. The company have now stated in an official statement that after assessing all options, administration is the preferred route. Grant Thornton are the appointed administrators. The FCA will continue to be in close contact with the company and their administrators, to ensure the fair treatment of customers.
Wonga Goes Into Administration
31 August 2018
Many of the claims being made are related to loans which were taken out before 2014. At this time, Wonga caused much controversy over their outrageous marketing – targeting the vulnerable, with slick campaigns. This resulted in the Financial Conduct Authority (FCA) capping the cost of borrowing.
Prior this cap, Wonga offered short-term loans with a catch of up to 4000% interest rates is charges were included. The FCA capped the rate to 0.8% and placed a £15 limit on default charges.
As the new caps were implemented, Wonga saw a big hit to their business. In 2014, lending volumes slowed by almost half, as did customer numbers. The firm had to write off £220m worth of debts for 330,000 customers. An annual loss of £37m was reported, a massive reversal to the £84m profit they made in 2012. Overnight, the ‘future of financial services’ firm, had spiralled into red.
2014 was not the only year they suffered. In 2015, losses doubled to just over £80m and in 2016, even with a focus on slightly longer-term loans and more flexible repayment terms, losses still hit £65m. Wonga had admitted they had lost their way. 2017 results are still yet to be released, though a return to profitability is very much unlikely.
In recent weeks, Wonga has shown further signs of difficulties. Earlier this month, £10m had been received as an emergency cash injection from shareholders, to prevent them from going bust.