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You can find the current article at its original source at https://www.theguardian.com/business/2018/aug/28/if-payday-lender-wonga-collapses-what-will-it-mean-for-customers
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| If payday lender Wonga collapses what will it mean for customers? | If payday lender Wonga collapses what will it mean for customers? |
| (2 days later) | |
| Britain’s biggest payday lender, Wonga, stopped taking new loan applications on Thursday, as it teeters on the brink of collapse following a surge of customer compensation claims that could cause it to call in administrators. | |
| A message on Wonga’s website tells its customers: “While it continues to assess its options Wonga has decided to stop taking loan applications.” | |
| The short-term loan provider has also reportedly lined up the accountancy firm Grant Thornton to handle a potential administration. | |
| Customers have begun to deluge the company’s helpline, where an automated message says there are delays in answering “because of an exceptionally high volume of calls”. | |
| I have a Wonga loan. Should I keep making repayments? | I have a Wonga loan. Should I keep making repayments? |
| There are believed to be about 220,000 existing Wonga customers. It is not a stock market quoted company, so few figures are available, but its last set of figures – now nearly two years old – showed it had £430m lent out, with an average loan size of £237. | |
| While the company is still in operation the legal obligation for customers to repay their debts remains unchanged. Those who do get through to the helpline are being told that if they fail to make a payment, their account will be passed to a debt recovery agency, with extra fees to pay. | |
| Wonga’s website points out: “The first time you miss a payment, you’ll have three days to repay before we charge you a missed payment fee of £15.” | |
| Banking works by people borrowing money and paying it back (with interest) – and nothing changes in that respect because a lender is struggling. If you are considering trying to get away without paying, be warned. | |
| If Wonga goes into administration will I still have to pay my existing loan back? | If Wonga goes into administration will I still have to pay my existing loan back? |
| Yes. Any administrator appointed will be acting in the interests of the company’s creditors. That means they would seek to get the best financial result possible for those owed money, principally by selling Wonga’s assets. | Yes. Any administrator appointed will be acting in the interests of the company’s creditors. That means they would seek to get the best financial result possible for those owed money, principally by selling Wonga’s assets. |
| Wonga’s main assets are the loans it makes and an administrator would look to sell these to another company. That company will then have the legal right to chase Wonga’s borrowers for the outstanding balance. | |
| However, they do not have the right to change the terms and conditions of a loan – they cannot increase the interest or demand early repayment. But a buyer of Wonga’s existing loan book may take a more (or less) aggressive approach to debt recovery than Wonga. | |
| I have made a compensation claim against Wonga. What will happen now? | I have made a compensation claim against Wonga. What will happen now? |
| If Wonga does not go into administration then your claim remains in the current process, which involves customers either agreeing a settlement with the company or having a claim assessed by the Financial Ombudsman Service. | |
| If the company does go into administration while your agreed claim has yet to be paid, you will join the list of creditors. The claims management companies that have been pursuing Wonga reckon that means your chance of obtaining compensation will be next to zero. | |
| The FOS has warned that if Wonga goes into administration it will not make any further assessments for compensation – and customers are not entitled to claim against the Financial Services Compensation Scheme. | |
| I was thinking of making a compensation claim. Can I still do so? | I was thinking of making a compensation claim. Can I still do so? |
| Yes. The company is still in business. | Yes. The company is still in business. |
| However, claims go through a process and are usually settled in a matter of weeks at best. If Wonga goes into administration before a settlement has been reached – or before the FOS has ruled that compensation is due – then customers are unlikely to receive much, if anything. | |
| Are the regulators doing anything to organise an orderly exit for the business? | |
| The Financial Conduct Authority has had discussions with Wonga to ensure that customer rights are being taken into consideration. And while Wonga will make any decision to appoint an administrator such as Grant Thornon, it must also seek the FCA’s approval to appoint them. | |
| Why doesn’t Wonga take out a 4,000% short-term loan to get it through its financial problems? | |
| Twitter is alive with people making jokes at the company’s expense. “What’s the problem with Wonga? Did they lend themselves a fiver?” is typical. But others spare a thought for the 500 workers at the company whose jobs are under threat. | |
| Wonga | Wonga |
| Payday loans | Payday loans |
| Borrowing & debt | Borrowing & debt |
| Consumer affairs | Consumer affairs |
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