Wonga, the payday lender, well known for its wholesome adverts, but notorious for its extortionate interest rates has collapsed into administration after it was brought down by the weight of compensation claims.
Wonga used to charge up to 5,853% interest APR.
The collapse leaves an estimated 200,000 customers still owing more than £400m in short-term loans.
The Financial Conduct Authority said it will supervise Wonga and seek fair treatment for customers, but that customers should continue to make any outstanding payments in the normal way as all existing agreements remain in place and will not be affected by the proposed administration.
Wonga was at one time was planning a stock market flotation and looked to be worth up to £1 billion, but it was brought to collapse by a flood of compensation claims over their illegal treatment of customers. For example, Wonga wanted to send out reminder letters to customers who weren’t paying on time so they invented a Solicitors name and sent out threatening letters from the fake solicitor. They seem to have believed they were above the law and could treat people anyway they wanted to.
They were ordered to pay compensation of £2.6m for those fake solicitors’ letters and recently the claims management companies got their teeth into Wonga with countless claims against them.
Wonga’s most recent accounts show a loss of £66.5m, but said costs and impairments were falling and that it remained a going concern. It said it had 220,000 customers and £430m in loans outstanding, figures.
Martin Lewis, the consumer champion, founder of MoneySavingExpert, said the firm’s collapse was a cause to celebration. “Normally when firms go bust, the fear is diminished competition. Not here. Wonga’s payday loans were the crack cocaine of debt – unneeded, unwanted, unhelpful, destructive and addictive. Its behaviour was immoral, from using pretend lawyers to threaten the vulnerable, to pumping its ads out on children’s TV.”
Good riddance to Wonga and everything it stood for.
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