5th Sep 2018
Payday lender Wonga announced last week that it is going into administration.
The announcement came after the company was forced to seek a bailout from backers in August, amid news that it was struggling to stay afloat after a surge in compensation claims prompted by a government clampdown on payday lenders.
Wonga was one of Britain’s biggest lenders to poorer borrowers, boasting a million customers at the height of its success in 2013.
However, the company faced criticism and censure in the past, most notably in 2014, when the Financial Conduct Authority (FCA) found that its debt collection practices were unfair and ordered it to pay £2.6m compensation to 45,000 customers.
Wonga’s interests were hit hard in the following years, as payday loan companies faced tougher rules and an interest cap was introduced.
The company posted pre-tax losses approaching £65 million in 2016, in contrast to its financial position in 2012, when the company was exploring a US stock market flotation that would have valued it at more than $1 billion.
Customers who have a Wonga loan will still be required to make repayments, although this will be overseen by Grant Thornton, who are acting as administrators.
The FCA said: “The FCA will continue to supervise Wonga once it is in administration and is in close contact with the proposed administrators with regard to the fair treatment of customers.
"Customers should continue to make any outstanding payments in the normal way. All existing agreements remain in place and will not be affected by the proposed administration. However, the firm is no longer able to issue new loans."
Customers who are still awaiting compensation payments from Wonga will now be in a queue for a pay-out, which will be funded by the sale of any assets.