The payday lending company Wonga has gone into liquidation, despite receiving a £10 million emergency fund from shareholders. According to Wonga, it struggled to cope with an influx of compensation claims.

Why did Wonga go out of business

It is widely known, the company has been in financial difficulty for some time and last month warned it was on the brink of collapse.

On August 30th, Wonga confirmed it’s UK and parent companies have gone into administration while trying to cope with thousands of compensation claims, after being accused of ‘irresponsible lending’. Wonga apparently targeted vulnerable customers and lent money tied to huge interest rates contracts.

They are no longer processing applications, but repayments are still being collected.

Administrators

Sky News reports that Grant Thornton, a professional services firm, will act as administrators if the board decides over the coming weeks that it is unable to avoid becoming insolvent.

What this means for Wonga customers

So, where do you stand if you have a debt outstanding with Wonga and will they be written off?

No, despite the demise of Wonga, your outstanding debts will remain payable. Once Wonga go into administration, the running of the company is taken over by the firm handling the administration.  If you have a loan outstanding with Wonga and are still paying it back, then you will have to continue your payments as normal.

It is possible, Wonga could attempt to raise funds by selling off their debts to other forms, who would then be responsible for collecting any outstanding payments. If this were to happen, the company who take over the loans, will need to meet specific regulations as set out by the Financial Conduct Authority (FCA).

Impact on Jobs

City regulators are apparently in discussions with Wonga, to try and salvage parts of the business in an effort to save approximately 500 jobs.

Wonga Facts

  • Launched in 2007 and became a byword for sky-high interest rates on short-term loans
  • Owned by a collection of the venture capital industry’s best-known names, including Balderton Capital, Accel Partners and 83North
  • Went through rapid expansion using technology to tailor financial offers to customers, but suffered problems with the FCA introduced a cap on the cost of short-term credit for consumers in 2014
  • Valued at $30m (£23m) prior to the injection bail out funds recently
  • Tara Kneafsey‎ (Wonga chief exec) informed fellow directors several months ago about big rise in compensation payouts
  • Ms Kneafsey warned in late May that the company risked becoming insolvent without a capital injection
  • Lost about £65m in 2016

Responsible Lending

This is just news, discussing what’s happening in the marketplace and wonga, a prominent name on the high street has gone out of business, amid thousands of claims for ‘irresponsible lending’.

Arrow Loans prides itself as a ‘responsible lender’ and is the one stop choice for many who seek low cost homeowner loans from a reliable direct lender.