It seems the reign of payday lenders could be coming to an end. Prominent short-term lender, Wonga, has announced its fall into administration after struggling to uphold its place in the market. Known for its memorable puppet TV adverts, it became one of the UK’s most promising financial technology firms. However, a recent spike in compensation claims preempted its eventual collapse.
The company’s collapse will impact many financially distressed individuals, with an estimated 200,000 customers still owing more than £400 million in short-term loans. Earlier this month the lender received a £10 million payout by investors in the hopes that this would stave off collapse. Unfortunately, the damage had already been done and a Wonga spokesman confirmed that compensation claims had only “accelerated further”, causing irrepressible damage.
The short-term credit industry has seen a sharp rise in compensation claims in recent months, with Wonga reporting its oldest loans as the most affected.
Wonga’s troubles started back in 2014 when it was ordered by the Financial Conduct Authority to reimburse 45,000 customers who had received a series of fraudulent correspondence pressuring them to pay up. The individuals involved were penalised and their behaviour criticised, thrusting the company into the spotlight and narrowly avoiding a criminal investigation.