Wonga Writing Off Debts for 330,000 UK Customers
October 3, 2014
The payday lender Wonga has announced it is to write off debts for 330,000 of its customers around the UK as a result of changing its policies on affordability and in response to ongoing discussions with regulators.
The amounts being written off are reportedly worth around £220 million but the resulting losses to Wonga are estimated at £35 million.
Wonga is a key player in Britain’s payday loan market but has come in for heavy criticism over its lending policies and debt recovery tactics in recent years.
In a series of statements the company outlined and explained a shift in its approach to lending with particular attention being paid to the issue of affordability among borrowers.
“We have strengthened our lending criteria to ensure that we only lend to customers we believe can reasonably afford to repay their loans,” the company said.
Wonga says it will write off all outstanding debt for 330,000 customers who have payday loans in arrears for longer than 30 days from October 2nd 2014. Around 45,000 Wonga customers with arrears of 29 days as of that same date will be asked to repay their debts without interest or charges over an extended period of four months.
“On conducting a review into our previous lending criteria, we recognised that we may not have always made the right lending decisions, and on reflection some of these loans may not have been affordable,” the lender said.
Wonga says it will be communicating via email or letter with the customers affected by its recent decisions and its lending policy reviews before October 10th.
The company also made commitments to ensure it lends money less often to people who are clearly not in a position to pay those amounts back and who are likely to face serious debt problems as a result.
“We have been working closely with the FCA (Financial Conduct Authority) to agree additional requirements to our lending criteria, which have been implemented as of the 2nd October 2014 across our UK consumer loans service,” Wonga said.
Andrew Haste, Wonga’s newly appointed chairman, said: “We want to ensure we only lend to those who can reasonably afford the loan in question and during my review, it became clear to me that this has unfortunately not always been the case.
The FCA released its own statements on the issue and its discussions with Wonga, describing the steps being taken by the company as having been agreed under the terms of a “voluntary requirement”.
Clive Adamson, the FCA’s director of supervision, said: “We are determined to drive up standards in the consumer credit market and it is disappointing that some firms still have a way to go to meet our expectations.
“This should put the rest of the industry on notice – they need to lend affordably and responsibly. 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.”