Wonga enters administration

The firm, which built its business by charging extortionate interest rates on loans to some of society’s most vulnerable people and came to be seen as a toxic symbol of Britain’s household debt crisis, has now appointed insolvency practitioners from Grant Thornton to manage the firms’ businesses and affairs.

Today’s news was comes after yesterday’s announcement that Wonga would no longer be accepting loan applications from customers.

The firm’s collapse comes while it still has an estimated 200,000 customers owing more than £400 million in short-term loans.

According to the Financial Conduct Authority (FCA), Grant Thornton plan to update current customers once the firm is in administration.

The FCA said it will continue to supervise Wonga once it is in administration and is in close contact with the proposed administrators with regard to the fair treatment of customers.

The City watchdog said customers should continue to make any outstanding payments in the normal way. All existing agreements remain in place and will not be affected by the proposed administration. However, the firm is no longer able to issue new loans.

It is expected that administrators will now seek to sell on the firm’s loan book.

Today’s news marks the end of the road for a business that has been condemned over the years by campaigners for “legal loan sharking” and targeting vulnerable borrowers with small loans which quickly spiralled out of control.

At one point customers faced interest rates as high as 5,853 per cent, before they were capped by ministers in 2015 and now stand at about 1,500 per cent.

At its height, the business was lined up for a stock market flotation with a price tag approaching £1bn.

However, this was prevented when Wonga’s business model was ruined by a cap on interest rates and in 2014 it was censured for issuing fake legal letters to customers in arrears and ordered to pay compensation of £2.6m.

The following year the whole payday loan industry was then hit with a price cap on loans which slashed interest rates to a maximum of 0.8 per cent a day.

In its last accounts, published in September 2017, the company reported a loss of £66.5m,

But its ultimate demise has been hastened by a more recent flood of compensation claims, each of which cost the company £550 to process, whether the borrower’s claim is upheld or not.

Many have come from claims management companies, such as PaydayRefunds, which said it had entered about 8,000 claims against the lender in the last six months alone.