Wonga has gone bankrupt, so here’s what you need to know about payday lenders and repayment rights

Wonga filed for bankruptcy after thousands of customers filed for compensation against the company.

The payday lender entered administration after facing huge problems with its astronomical interest rates and unethical loan allegations.

Britain’s largest payday lender, in 2012 it granted four million loans to more than one million clients.

In a statement, Wonga said that after evaluating all options, the board “concluded that it was appropriate to put the companies under administration.”

Plagued with financial problems, Wonga received £ 10million from shareholders just weeks ago to prevent the company from going bankrupt.

But that was not enough and the statement read: “Wonga clients can continue to use Wonga’s services to manage their existing loans, but the UK company will not accept any new loan applications. Clients can find more. information on the website. “

Wonga has faced a barrage of criticism over the high interest it charges on its loans in recent years, with the company accused of targeting those who are particularly vulnerable.

A man said The mirror his friend committed suicide after the company emptied the 18-year-old’s bank account, leaving him penniless in 2013.

Wonga’s ads featured cute and cuddly characters

The problem with payday lenders

Payday lenders have long been controversial over the methods they use to promote, distribute, and recover unsecured loans which are typically designed to be paid off on a person’s next payday. The problem is that the interest rates are often so high that the borrower is unable to keep up with the repayments.

Earlier this year, a report from the Cash Lady comparison website identified NHS staff, council officials and odd-job economy workers among the most regular applicants for emergency payday loans. In the UK, around 300,000 people a month take out high-cost short-term credit.

Last year, The Money Advice Trust said in a parliamentary inquiry into payday loans that “when young people reach the age of 16 to 24 and consider borrowing, they are more likely to opt for higher cost credit than traditional alternatives, “simply because the marketing was so” slick “and the online experience so easy.

Sarah-Jayne Clifton, director of the Jubilee Debt Campaign, said the numbers showed that “we need the government to take urgent action, not only to curb fraudulent lenders, but also to tackle the crisis in the cost of debt. life and cuts in social protection. that drive people to loan sharks in the first place. “

The surge in Wonga complaints

Earlier this month, Wonga said his struggles were due to a “significant” increase in the number of people making claims over historic loans dating back to 2014.

The lender blamed claims handling companies for the rise, but said it was making progress on a defined transformation plan for the company.

Wonga said the number of complaints related to UK loans taken before 2014 had “accelerated further”.

In 2014, the company put in place a new management team and wrote off £ 220million debt belonging to 330,000 clients after admitting to offering loans to people who could not afford them. refund.

FCA said Wonga had failed to take adequate steps to assess clients’ ability to cope with repayments in a sustainable manner.

He offered interest waivers and the lender was forced to write off debts for thousands of people following talks with the regulator. In recent months, Wonga said he has seen an unexpected increase in such complaints.

Does Wonga owe you money?

Wonga Complaints – How To Check If You Have Been Abused

In 2015, the Financial Conduct Authority (FCA) introduced stricter payday loan rules to help regulate the market, making it fairer for borrowers.

It introduced a 0.8% price cap on high-cost short-term credit (HCSTC), limits on the number of times a payday loan can be renewed, and stricter guidelines on credit checks. affordability and financial health warnings.

What lenders should tell you when you take out a loan

  • How much would it cost you to repay the loan in total
  • Tell you that payday loans should not be used for long-term borrowing or if you are having financial difficulties
  • Tell you what to do if you have a complaint

Someone who takes out a loan for 30 days will pay no more than £ 24 in fees and charges per £ 100 borrowed, and if you don’t pay back on time, the maximum late charge is £ 15 plus interest on the amount you borrowed.

An overall cap means you’ll never pay back more than double what you originally borrowed.

Companies are also required to conduct comprehensive affordability checks of all borrowers to ensure that they can afford the loan.

This is in line with the underlying FCA guidelines which state that all companies must be able to show that fair treatment of customers is at the heart of their business model.

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How to make a complaint

Payday lenders are supposed to check that you are able to repay the loan before you lend, but sometimes they don’t play by the rules. If a payday lender violates these guidelines, you can file a complaint.

To open a dispute, contact your lender and try to work things out with them. Here’s how to get in touch with Wonga (or call 0207 138 8330).

You will need to find the addresses where you lived when you took out the loans as well as your account details. You will also need details of the account names as well as the dates and deadlines. Think back to the application process: how much more money was / was it offering than you needed?

Explain in as much detail as possible the rules you believe you have been broken, why, and the impact it has had on you. Be as clear as possible, but try not to get too emotional – keep it concise. Take photocopies of any evidence and send it with your complaint.

They then have five days to acknowledge your concerns and eight weeks to try to resolve them for you.

If after two months you have had no luck with a result (or you remain dissatisfied), you can report it to the financial mediator. They will then make suggestions on how the matter can be resolved or open a formal investigation. A resolution must be given within six months of receiving a response from the lender.

What does Wonga’s bankruptcy mean for compensation claims?

Unfortunately, there is bad news here.

“Wonga’s collapse as a lender could potentially shut the door on people making claims,” ​​James Walker, founder of the free customer complaints service. Resolver said Mirror Money.

But that doesn’t mean you have to stop trying.

“The liquidation process can take a long time, even if it is confirmed. So if you’ve been the victim of an inappropriate loan then make those claims now, ”Walker said.

To find out if you are eligible, you can read our full guide on who can claim Wonga compensation here .

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