Wonga to Wipe More Than 300,000 Debts
The UK’s biggest payday lender, Wonga, has been the subject of much controversy over the past year or so. Now the company is trying to pull back and makes amends for some of its misgivings, by agreeing to write off more than 300,000 debts of customers who are 30 or more days in arrears.
Customers will be contacted by 10 October to be informed if they are one of the 330,000 people who have had their debt written off. This amount totals a staggering £220 million.
Around 45,000 other customers who have arrears spanning up to 29 days will also be compensated. While these customers still have to repay their debts, any interest or additional charges will be wiped from that amount. They will also be able to repay over an extended four-month period if they so choose.
Wonga’s new chairman, Andy Haste, said that he was made aware of concerns expressed by the Financial Conduct Authority (FCA) when he joined the team. He explained that the announcement has come as a consequence of talks with the regulatory body and that new lending criteria would be implemented as soon as possible to address those concerns.
“We want to ensure we only lend to those who can reasonably afford the loan in question,” he declared. “There’s much to do in order to make Wonga a sustainable and accepted business, and [the] announcement is a significant step forward in that process.”
In a press release about the announcement, the FCA explained that they became responsible for regulating consumer credit earlier this year, in April. When they did so, they requested information on how often Wonga re-lends to its customers. This information led the FCA to conclude that Wonga wasn’t sufficiently assessing “customers’ ability to meet repayments in a sustainable manner”.
FCA’s Director of Supervision Clive Adamson said that as they are determined to drive up standards, the rest of the consumer credit industry should make sure they are lending responsibly and affordably.
“It is absolutely right that Wonga’s new management team has acted quickly to put things right for their customers after these issues were raised by the FCA,” he added.
The new lending criteria will be reviewed by the FCA and a currently-unknown third party. Due to the crack-down, it is also expected that some customers who have used the service before, won’t be able to again in the future. One thing that is certain, though, is that Wonga will be accepting far fewer loan applications, both from new customers and existing ones.