Payday lender Wonga ‘on the brink of collapse’ after surge in compensation claims
Wonga has lined up potential directors after an increase in compensation claims pushed the payday lender to the brink of collapse, according to reports. The company said it was “looking at all options” just weeks after shareholders injected £ 10million in a bid to keep it from going bankrupt.
According to Sky News, Wonga has appointed financial services firm Grant Thornton to act as administrator in the event the lender’s board decides it cannot avoid insolvency. Earlier this month, Wonga said his struggles were due to a “significant” industry-wide increase in the number of people making claims over historic loans. The lender blamed claims handling companies for the rise, but said it was making progress on a defined transformation plan for the company.
On Sunday, Wonga said the number of complaints about UK loans taken before 2014 had “accelerated further”. “Against this backdrop of demands, Wonga’s board continues to assess all options regarding the future of the group and all of its entities,” the company told the BBC.
Wonga has faced a barrage of criticism over the high interest she charges on her loans and has been accused of targeting vulnerable people. In 2014, the company put together a new management team and wrote off £ 220million debt belonging to 330,000 customers after admitting to making loans to people who could not afford to repay them. . That same year, the Financial Conduct Authority said it would introduce tighter affordability controls for the industry and introduce a 0.8% cap on the cost of payday loans on the amount borrowed per day.
Wonga’s consumer loan income plummeted from £ 217.2million to £ 77.3million in 2015, calling into question ‘tighter lending criteria’ and the introduction of the cap regulatory prices. Company president Andy Haste said at the time that he hoped 2016 would be a “turning point” in the company’s financial performance and that he expected to return to profit the following year. – PA