Payday loan giant Wonga is on the verge of collapse after a surge in compensation claims from people who borrowed at scam rates of up to 5,853% before the watchdog crackdown requires a huge reduction
- Firm was once one of Britain’s fastest growing consumer finance companies
- Three weeks ago he received an emergency injection of £ 10million to stay afloat
- This triggered compensation claims from claims handling companies
- Previous influx of claims after FCA introduced a cap on the cost of short-term credit
- Wonga Appoints Professional Services Firm Grant Thornton as Director
Wonga is on the verge of collapse after an increase in customer compensation claims.
The payday loan company was once one of Britain’s fastest growing consumer finance companies.
He even had the ambition to be listed on the New York stock exchange which could have valued him at more than a billion dollars.
But the company is now on the rocks just three weeks after receiving an emergency £ 10million injection to stay afloat.
Wonga is on the verge of collapse after surge in customer compensation claims (Photo: Company TV commercial)
Wonga, launched in 2007, is chaired by former insurance boss Andy Haste
In 2014, the Financial Conduct Authority introduced a cap on the cost of short-term credit for consumers.
This sparked complaints from those who had borrowed from Wonga at astronomical annual interest rates of up to 5,853% before the new rules took effect.
A new influx of claims from claims handling companies – who help clients get compensation in exchange for reduced payment – was sparked after the release of the $ 10million injection. of pounds sterling.
Claimants can seek compensation if Wonga treated them irresponsibly – for example, by repeatedly granting them loans they clearly had difficulty repaying.
Wonga has hired professional services firm Grant Thornton to act as administrator if he is unable to circumvent the insolvency, Sky News report.
Company executives have reportedly been in talks with the Financial Conduct Authority to discuss its options.
Its administration process may be similar to that used by House of Fraser, which would involve a buyer acquiring some of Wonga’s operations.
Part of the company’s 500 employees could be preserved as part of this process.
Wonga reportedly hired professional services firm Grant Thornton to act as administrator if he was unable to circumvent the insolvency
Wonga previously raised his profile by sponsoring Newcastle United (players pictured with the company logo on their shirts)
Wonga, launched in 2007, is chaired by former insurance boss Andy Haste.
It is owned by big names in the venture capital industry including Balderton Capital, Accel Partners and 83North.
It was set up to set up a £ 2.6million compensation scheme in 2014 when it emerged that up to 45,000 clients received threat letters from a fake law firm made up by Wonga staff.
The company has previously strengthened its profile by sponsoring Newcastle United and continues to trade in countries such as South Africa and Spain.
Despite losing around £ 65million in 2016, it was aiming for a return to profitability in 2017.
It is not clear if this has been achieved as the figures have yet to be released.
The short-term loan controversy led the company to introduce a flexible loan product to improve its image.
The board had aimed for a return to profitability this year.
Record card madness of £ 11 billion
Credit card spending has hit an all-time high amid fears that households are living beyond their means.
Buyers spent £ 11.1 billion on plastic in July, the highest monthly figure recorded by industry body UK Finance.
His report showed Britons now owe £ 44.1 billion on credit cards from major banks, up 5.3% from a year ago.
The numbers also show we are saving less, with savings growth slowing to a record high of 1.2% last month.
James Daley, campaign group Fairer Finance, said: “There are households that are too indebted and cannot afford to pay it off. It is a concern.