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Wonga 'considering all options' amid compensation claims Wonga 'considering all options' as compensation claims surge
(about 1 hour later)
Payday lender Wonga has said it is considering "all options" after reports suggested it was on the brink of collapse.Payday lender Wonga has said it is considering "all options" after reports suggested it was on the brink of collapse.
It follows a surge in compensation claims against the firm, amid a government clampdown on payday lenders.It follows a surge in compensation claims against the firm, amid a government clampdown on payday lenders.
According to Sky News, the firm has lined up Grant Thornton to act as administrators in the event it becomes insolvent.According to Sky News, the firm has lined up Grant Thornton to act as administrators in the event it becomes insolvent.
It said the ailing firm would make a decision about its future within weeks.It said the ailing firm would make a decision about its future within weeks.
Once Britain's biggest payday lender, Wonga faced criticism for its high cost, short term loans, which some said targeted the vulnerable. Britain's biggest payday lender, Wonga faced criticism for its high cost, short term loans, which some said targeted the vulnerable.
Tougher rules
In 2014 the Financial Conduct Authority found its debt collection practices were unfair and ordered it to pay £2.6m to compensate 45,000 customers.In 2014 the Financial Conduct Authority found its debt collection practices were unfair and ordered it to pay £2.6m to compensate 45,000 customers.
Since then, payday loan companies have faced tougher rules and have their charges capped.Since then, payday loan companies have faced tougher rules and have their charges capped.
This has hit Wonga's profits hard and in 2016 it posted pre-tax losses of nearly £65m, despite claiming its business had been "transformed".This has hit Wonga's profits hard and in 2016 it posted pre-tax losses of nearly £65m, despite claiming its business had been "transformed".
It has continued to face legacy complaints and was forced to seek a bailout from its backers this month amid a surge in claims.It has continued to face legacy complaints and was forced to seek a bailout from its backers this month amid a surge in claims.
A Wonga spokesman said: "Wonga recently raised £10m from existing shareholders to address the significant increase in legacy loan complaints seen across the UK short-term credit industry.A Wonga spokesman said: "Wonga recently raised £10m from existing shareholders to address the significant increase in legacy loan complaints seen across the UK short-term credit industry.
"Since then, the number of complaints related to UK loans taken out before the current management team joined in 2014 has accelerated further, driven by claims management company activity."Since then, the number of complaints related to UK loans taken out before the current management team joined in 2014 has accelerated further, driven by claims management company activity.
"Against this claims backdrop, the Wonga board continues to assess all options regarding the future of the group and all of its entities.""Against this claims backdrop, the Wonga board continues to assess all options regarding the future of the group and all of its entities."
Fall from grace
According to Sky, the firm is exploring the possibility of a pre-pack administration process similar to that used recently by House of Fraser.According to Sky, the firm is exploring the possibility of a pre-pack administration process similar to that used recently by House of Fraser.
However, it could also look to sell assets, including its Polish subsidiary to bolster its cashflow.However, it could also look to sell assets, including its Polish subsidiary to bolster its cashflow.
The company's board is likely to decide on its future in the coming weeks, Sky reported. It has held detailed talks with the Financial Conduct Authority, the City regulator, about its options, Sky reported.
It marks a huge fall from grace for Wonga which, in 2012, was touted to be exploring a US stock market flotation that would have valued it at more than $1bn (£770m).