The Payday lender Wonga has agreed to write off the debts of 330,000 customers after talks with regulators prompted it to put in place new affordability checks.
Any customer whose loan would not have been approved under the new checks will have this written off and a further 45,000 customers will not have to pay interest on their loans. Customers that meet the criteria will be contacted by 10th October.
New chairman Andy Haste, who described the need for change as “real and urgent”, made the announcement following discussion with the Financial Conduct Authority and an internal review of lending practices. In future, he added, Wonga would be “accepting far fewer applications from new and existing customers“.
“We want to ensure we only lend to those who can reasonably afford the loan in question and during my review, it became clear to me that this has unfortunately not always been the case,” he said.
“I agreed with the concerns expressed by the FCA and as a consequence of our discussions we have committed to taking these actions.”
The FCA hopes that other lenders will follow suit. “This should put the rest of the industry on notice,” commented Clive Adamson, director of supervision at the FCA. “They need to lend affordably and responsibly.”
However, not everyone is impressed. MP Pat McFadden, a member of the Treasury Committee, believes that Wonga bosses should be brought before his committee for questioning.
“By not doing proper credit checks, Wonga looks to have built a business on rolling over loans and building up debt for many people who could never afford to repay in the first place,” McFadden, told the BBC. “The effect on consumers has been to build up debts at astronomical rates of interest.”
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