Payday lender Wonga ‘on brink of collapse’ after surge in compensation claims
Wonga has lined up potential administrators after a surge in compensation claims pushed the payday lender to the brink of collapse, according to reports.
The firm has said it is “considering all options” just weeks after shareholders pumped £10 million in a bid to save it from going bust.
According to Sky News, Wonga has earmarked financial services firm Grant Thornton to act as administrator in case the lender’s board decides it can not avoid insolvency.
Earlier this month, Wonga said its struggles were due to a “significant” increase industry-wide in people making claims in relation to historic loans.
The lender blamed claims management companies for the rise, but said it was making progress against a transformation plan set out for the business.
On Sunday, Wonga said the number of complaints related to UK loans taken out before 2014 had “accelerated further”.
“Against this claims backdrop, the Wonga board continues to assess all options regarding the future of the group and all of its entities,” the company told the BBC.
Wonga has faced a barrage of criticism over the high interest it charges on its loans and it has been accused of targeting those who are vulnerable.
In 2014, the firm introduced a new management team and wrote off £220 million-worth of debt belonging to 330,000 customers after admitting making loans to people who could not afford to repay them.
In the same year, the Financial Conduct Authority said it would bring in stricter affordability checks to the industry and introduce a 0.8% cap on the cost of payday loans on the amount borrowed per day.
Revenues from Wonga’s consumer lending collapsed from £217.2 million to £77.3 million in 2015, with it blaming “stricter lending criteria” and the introduction of the regulatory price cap.
Company chairman Andy Haste said at the time he hoped 2016 would be a “turning point” in the company’s financial performance and was expecting to return to profit the following year.