Payday lender Wonga on brink of collapse
Payday lender Wonga is not accepting new loan applications as the firm appears to be on the verge of going out of business.
A notice on the group’s website said: “While it continues to assess its options Wonga has decided to stop taking loan applications. If you are an existing customer you can continue to use our services to manage your loan.”
The news comes in the wake of a huge number of compensation claims which have led to shareholders providing an emergency £10m earlier this month.
The payday lender has reportedly earmarked financial services firm Grant Thornton to act as administrator in case the company falls into collapse.
What does this mean for customers?
According to Moneysavingexpert customers will have to continue repaying the loan.
A statement said: “If you have an outstanding Wonga loan you should keep repaying it unless you are told otherwise. If any financial firm you owe money to goes into administration you’ll still have to continue paying the cash, you’ll just pay an administrator or new firm instead, if it’s bought out.”
While existing customers can still use Wonga services to manage their loans, the company looking at options including insolvency as it struggles to pay out the compensation claims.
Wonga has said it will make a decision about its future within weeks.
Where did things go wrong for Wonga?
The firm’s troubles have been happening since 2014 when Wonga posted a revenue loss of more than £37m, down from £84m profit just two years earlier. The losses doubled the year after to just over £80m.
This was compounded by the Financial Conduct Authority’s decision to cap the cost of payday loans at 0.8% of the amount borrowed per day and impose a £15 limit on default charges.
This decision, which saw new affordability checks be put in place, prompted the firm to write off debts of £220m for 330,000 customers.
Even with a reshuffle, Wonga announced it lost £65m in 2016 and has still not released its financials for the past year.