Payday Loan Specialists Wonga UK Go Into Administration
Wonga was founded by South African Errol Damelin and offered UK lenders an easy way to access a small loan via an app on their phone. At the time it was streaks ahead of its competitors. One expert called their easy access loans the ‘crack cocaine of debt‘. This month the UK operation collapsed and is now being placed into administration.
Wonga UK repeatedly received flack over the years for its cheeky advertising featuring puppets, high interest rates (which government in the UK had to step in and curb) and questionable collections practices. At one stage they even got into trouble for producing fake legal letters (which was exposed by a consumer watchdog in the press).
‘they even got into trouble for producing fake legal letters’
The profit tide for the firm began to swing heavily when, in 2015, the UK Financial Conduct Authority changed the amount of interest that could be charged and limited it to a still scary 1,500% (at one stage Wonga UK were found to be charging as much as 5,853% if you can believe that. Crazy!). Added to that have been a string of compensation claims which hit hard and the UK Financial Ombudsman Service are breathing down their necks. Placing the firm into Administration will now likely mean those who are claiming will not receive any significant compensation.
‘Recently the firm made a 66.5 Million pound loss’
Recently the firm made a 66.5 Million pound loss and just went through the process of trying to raise around 10 Million pounds from investors before the bad news hit. Wonga UK will probably be under administration by Grant Thornton and will not be granting more loans (but they will still be collecting on existing loans from their +- 200 000 clients, of course).
It is unclear, at this point, how the news regarding the UK operation will affect the SA arm of the brand which operates within the more conservative restrictions of the National Credit Act and affordability assessment requirements). At present their website simply states: ‘Wonga Finance SA is regulated and managed locally and is a completely separate entity to the UK operations. As such, Wonga South Africa continues to lend to, and service our customers as normal”.