Wonga, the payday lender, says it will file for administration, bringing to an end one of the UK's largest short-term credit companies after it was overwhelmed by a surge in complaints from former customers.
Wonga’s overseas businesses will not be part of the administration and will continue to trade, the company said in a statement late on Thursday. It has operations in Poland, South Africa and Spain.
The company had already said it would no longer accept new loan applications. Customers can still manage their existing loans, the company said in its statement.
The UK’s financial regulator is also expected to make a statement and has been liaising closely with the company. While Wonga had to ask the Financial Conduct Authority for permission to appoint an administrator, the decision ultimately lay with the company’s board.
“A decision has been taken to place Wonga Group Ltd, WDFC UK Ltd, Wonga Worldwide Ltd and WDFC Services Ltd into administration,” its statement said.
Wonga received a £10 million emergency cash injection earlier this month in an attempt to keep the business afloat, but has since experienced a further spike in compensation claims. One person close to the company said complaints had risen 80 per cent since the capital was raised.
Each complaint to the Financial Ombudsman Service costs Wonga £550 in fees even before any compensation payout – more than Wonga’s average loan size.
The company, backed by high-profile investors such as Balderton Capital and Accel Partners, expanded rapidly after its launch in the wake of the financial crisis, offering small short-term loans with annual interest rates of up to 5,800 per cent.
- Copyright The Financial Times Ltd
