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Wonga writes off £220m for 330,000 customers Wonga writes off debts for 330,000 customers
(34 minutes later)
Controversial payday lender Wonga is writing off £220m of loans to 330,000 people, admitting that it should never have lent to them in the first place. The controversial payday lender Wonga is writing off £220m of loans to 330,000 people, admitting that it should never have lent to them in the first place.
The company, which has been accused of “legal loan sharking” by MPs, said it would entirely wipe out the loans owed by 330,000 people and scrap interest and charges owed by a further 45,000. The company, which MPs have accused of “legal loan sharking”, said it would entirely wipe out the loans, and scrap interest and charges owed by a further 45,000 customers.
Wonga’s new chief executive, Andy Haste, said the company had been wrong to lend the money to people that could not afford the loans. Wonga’s new chief executive, Andy Haste, said the company had been wrong to lend the money to people that could not afford to pay it back.
“We are taking action to address the failing of the past,” Haste said. “This business had been too focused on growth and cared more about the loan outcome than the customer outcome.“We are taking action to address the failing of the past,” Haste said. “This business had been too focused on growth and cared more about the loan outcome than the customer outcome.
“We are clearly very sorry for what’s happened to our customers and are doing everything to put that right.”“We are clearly very sorry for what’s happened to our customers and are doing everything to put that right.”
He said Wonga had lacked experience credit professionals and “lent to people we should not have lent to”.He said Wonga had lacked experience credit professionals and “lent to people we should not have lent to”.
“The checks were not sophisticated enough and not strong enough,” he added. “The checks were not sophisticated enough and not strong enough,” he said.
Haste said Wonga’s action came after the City regulator, the Financial Conduct Authority (FCA), “raised concerns about our lending practices”. Wonga’s action came after the City regulator, the Financial Conduct Authority (FCA), “raised concerns about our lending practices”, he added.
Wonga will write off the outstanding debts of 330,000 people who are in arrears of 30 days or more, and let a further 45,000 people who are in arrears of less than 30 days, as of 2 October, to pay back their loans without interest or charges. Customers affected will be notified by 10 October. Wonga estimated that the write-offs will cost it about £35m as it has already taken provisions against many of the loans. Wonga will write off the outstanding debts of 330,000 people who are more than 30 days in arrears, and let a further 45,000 people who are less than 30 days in arrears as of 2 October to pay back their loans without interest or charges. The customers affected will be notified by 10 October. Wonga estimated that the writeoffs will cost it about £35m as it has already taken provisions against many of the loans.
Haste, a respected City veteran who joined the company in the summer, said he would “not apportion blame” on Wonga’s founder Errol Damelin who quit the firm in June. Haste, a respected City veteran who joined the company in the summer, said he would “not apportion blame” on Wonga’s founder Errol Damelin, who quit the firm in June.
John Mann, a Labour MP on the Treasury select committee, said Wonga should be called before parliament urgently to explain its “underhand tactics”, which he said disproportionately affected poor people.John Mann, a Labour MP on the Treasury select committee, said Wonga should be called before parliament urgently to explain its “underhand tactics”, which he said disproportionately affected poor people.
“I welcome today’s latest step by the FCA to crack down on irresponsible payday lenders and this is a company that has taken advantage of people in dire financial circumstances,” he said.“I welcome today’s latest step by the FCA to crack down on irresponsible payday lenders and this is a company that has taken advantage of people in dire financial circumstances,” he said.
“Sadly, it comes as no surprise to learn that Wonga knowingly lent money to people who will never be able to afford to repay a loan and it is morally right that they have been forced to write off these loans.“Sadly, it comes as no surprise to learn that Wonga knowingly lent money to people who will never be able to afford to repay a loan and it is morally right that they have been forced to write off these loans.
“I have written to the chairman of the Treasury select committee asking that he summons Wonga’s senior management to appear before the committee to explain their actions.”“I have written to the chairman of the Treasury select committee asking that he summons Wonga’s senior management to appear before the committee to explain their actions.”
The action has come about because Wonga was granting loans to borrowers without checking that they could afford to make the repayments. The company boasts on its website that it will pay the money into customers accounts within five minutes of the loan being approved.The action has come about because Wonga was granting loans to borrowers without checking that they could afford to make the repayments. The company boasts on its website that it will pay the money into customers accounts within five minutes of the loan being approved.
It is understood that the checks the lender was making were so poor that many of its borrowers had no chance of ever repaying the loan because of the dire financial situation they were already in.It is understood that the checks the lender was making were so poor that many of its borrowers had no chance of ever repaying the loan because of the dire financial situation they were already in.
The FCA and Wonga are continuing to look at whether any other customers might be affected. It is understood that this could include former Wonga customers who managed to pay off their loans but should never have been lent to in the first place. If these customers were identified, this could lead to another huge bill for the payday loan company. The FCA and Wonga are continuing to look at whether any other customers might be affected. It is understood that this could include former Wonga customers who managed to pay off their loans but should never have been lent to in the first place. If these customers were identified, it could lead to another huge bill for the company.
As well as the redress announced to customers, Wonga has also changed its lending criteria from Thursday. It said there will now be greater scrutiny of “loan to income ratio” – in other words it will look more closely at the amount a borrower earns and work out whether they can make the repayments on their requested loan. Wonga has also changed its lending criteria with immediate effect. It said that from now on there would be greater scrutiny of “loan to income ratio”.
It will also put a “30-day freeze” in place for people who have been in arrears before or have been rejected for a loan. Previously someone who had made late repayments but then paid off a loan could immediately apply for another one. Similarly, someone who had been rejected by Wonga could also immediately reapply. Now both sets of people will be barred from reapplying for 30 days. It will also put a “30-day freeze” in place for people who have been in arrears before or have been rejected for a loan. Previously someone who had made late repayments but then paid off a loan could immediately apply for another one. A potential customer Wonga rejected could also immediately reapply. Now both sets of people will be barred from reapplying for 30 days.
Wonga said that the changes would mean “a material drop in the number of loans to new and existing customers”.Wonga said that the changes would mean “a material drop in the number of loans to new and existing customers”.
The firm will also be implementing new software that will determine how it lends. The creation of this new “lending decision engine” will be overseen by a company appointed by the FCA. The firm will also be implementing new software that will determine how it lends. The creation of a “lending decision engine” will be overseen by a company appointed by the FCA.
One Wonga customer, Dan, who has a loan of just over £1,000 with the payday lender and is in arrears of more than 45 days welcomed the news. “Though no guidelines have yet to be published, I am hoping this deal struck puts me in the bracket of those who do not need to repay,” he said. “If so, it would be a very welcome gift.” One Wonga customer, Dan, who has a loan of just over £1,000 and is more than 45 days in arrears, welcomed the news. “Though no guidelines have yet to be published, I am hoping this deal struck puts me in the bracket of those who do not need to repay,” he said. “If so, it would be a very welcome gift.”