Payday lender Wonga writes off customer debts worth £220m and brings in new checks for future loans after talks with the financial regulator.
Payday lender Wonga will write off 330,000 personal loans worth £220m after talks with the Financial Conduct Authority (FCA) over its lending practices.
The loans will be written off for borrowers with arrears of 30 days or more, while 45,000 customers who are in arrears up to 29 days will be asked to repay their debt without interest and charges, and can do so over an extended period of four months.
We’re trying to compete you out of existence Archbishop of Canterbury Justin Welby on fighting Wonga
Andy Haste, Wonga’s new group chairman, said that as well as tightening Wonga’s “lending criteria”, the company will be accepting “far fewer applications from new and existing customers”.
“It’s clear to me that the need for change at Wonga is real and urgent,” he added.
“There is much to do in order to make Wonga a sustainable and accepted business, and today’s announcement is a significant step forward in that process.”
Economics Editor Paul Mason talking to Tessa Cook, Wonga’s UK Managing Editor, about the fake letters in June
Wonga announced in September that its profits had halved after having to pay money back to customers.
It said it also expected to become “smaller and less profitable” in future, partly due to controls imposed by the FCA.
New rules introduced in July required all payday loan companies to conform to new rules which tighten affordability checks and limit roll-overs of loans.
In June Wonga was ordered to pay compensation to 45,000 customers totalling £2.6m after sending out fake letters from fictitious law firms.
The firm was also instructed to compensate 200,000 customers who were overcharged as the result of a technical issue, and in total the issues cost Wonga £18.8m.
The Archbishop of Canterbury, Justin Welby, vowed last year to put Wonga out of business as the church expanded credit unions as an alternative to payday lenders.
Speaking about Errol Damelin, then the chief executive of Wonga, the archbishop said: “I said to him quite bluntly: ‘We’re not in the business of trying to legislate you out of existence, we’re trying to compete you out of existence’.”
His remarks came after he launched a new credit union for clergy and church staff at the General Synod in York.
He also planned to encourage church members with relevant skills to volunteer at credit unions and to explore the possibility that small, local lenders could be invited to use church buildings and other community locations with the help of church members.