Wonga collapses into administration

Thread: Wonga collapses into administration

  1. Raptor's Avatar

    Raptor said:

    BBC News Wonga collapses into administration


    Payday lender Wonga has announced its intention to go into administration after losing its battle to stay afloat.
    The company said in a statement that it had assessed all options and had decided that administration was the appropriate route.
    It had already stopped accepting new loan applications as it fought to stave off collapse.
    Its demise in the UK follows a surge in compensation claims amid a government clampdown on payday lenders.
    Grant Thornton will be acting as administrators.
    In a statement Wonga said: "Customers can continue to use Wonga services to manage their existing loans but the UK business will not be accepting any new loan applications. Customers can find further information on the website.

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    "Wonga's overseas businesses continue to trade and are not part of this announcement."
    Wonga, which was the UK's biggest payday lender, had faced criticism for its high-cost, short-term loans, seen as targeting the vulnerable.
    In 2014, the Financial Conduct Authority found that Wonga's debt collection practices were unfair and ordered it to pay £2.6m to compensate 45,000 customers.
    Since then, payday loan companies have faced tougher rules and have their charges capped.
    This hit Wonga's profits hard. In 2016, it posted pre-tax losses of nearly £65m, despite claiming its business had been "transformed".
    It continued to face legacy complaints and was forced to seek a bailout from its backers in August amid a surge in claims.
    It was a huge fall from grace for Wonga, which in 2012 was touted to be exploring a US stock market flotation that would have valued it at more than $1bn (£770m).

    Analysis: Kevin Peachey, personal finance reporter
    Wonga never considered itself to be a payday lender, preferring instead to describe itself as a maverick technology company that happened to sell loans.
    Its technology was groundbreaking, allowing the smartphone generation to choose how much they wanted to borrow with the slide of a thumb.
    That convenience, matched with a huge advertising campaign featuring amusing puppets and upbeat voiceovers, proved a hit. At the height of its success in 2013, Wonga had a million customers.
    But Mick McAteer, founder of the not-for-profit Financial Inclusion Centre, said this demand was a bubble: "They were flogging [credit] and they created demand for it."
    In other words, some borrowers simply did not need to borrow from a payday lender, but were attracted towards these high-cost, short-term loans anyway.

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  2. Mickey's Avatar

    Mickey said:

    Default Re: Wonga collapses into administration

    perhaps they could borrow sum cash to help them thru the bad times
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  3. DavidF's Avatar

    DavidF said:

    Default Re: Wonga collapses into administration

    Thought it was a bit mad for the investors who gave another 10 million cash injection less than a month ago....oh well f-them for investing in legalised loan sharks..you reap what you sew.
     
  4. BertRoot's Avatar

    BertRoot said:

    Default Re: Wonga collapses into administration

    Karma is a bitch...

     
  5. JonEp's Avatar

    JonEp said:

    Default Re: Wonga collapses into administration

    An alternative view ..

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    The payday lender Wonga reportedly stands on the brink of collapse, because the company – once set for a stock market valuation in excess of $1bn – has struggled to raise funding to pay compensation claims for excessive charges to customers.

    Wonga is hardly a company many would mourn: its advertised APRs (the official way to calculate loan interest) varied from 1,509% to in excess of 5,000%, at a time when the Bank of England base rate was just 0.5%. The company charged sizeable fees to struggling customers who missed repayments and it advertised aggressively. It’s now stopped taking new loan applications.

    To many, the company made a perfect pin-up villain, an example of the kind that was willing to exploit those struggling in an era of austerity, real-terms cuts to wages and working-age benefits, and people who were just looking to get through the month.

    That view is not necessarily wrong – except for ignoring just how bad are most of the alternatives to Wonga. The reality is that there are almost no other options on the table, and all of them are worse. I know this because I was a Wonga customer.

    My financial position was probably better than many people who needed the service – for one, I didn’t have children to feed – but it was quite tight: earning £20,000 a year, every month I was paying £500 in rent, plus bills, plus a £210 graduate loan, plus £220 on a rail travelcard.

    This left about £80 a month for everything else, and when money’s that tight not much needs to go wrong for your finances to totally unspool, especially when you have no savings and not much of a safety net – I once spent two days sleeping on a beach after locking my keys in my flat, having to wait until payday because my landlord charged a £50 deposit to get the spares.

    With direct debits coming out just before getting paid, a loan of £100-£200 was often the difference between going into unauthorised overdraft and/or having a utility bill bounce, or squeaking through the month. The £20 or £30 cost might translate into an appalling APR, but compared to being charged by the bank for the unpaid direct debit and the overdraft, or a fee from the electricity or water company if the payment bounced, it was tiny – those costs could creep up to £100 or £150.

    What other realistic alternatives existed? Like most people whose finances were that tight, my credit rating wasn’t good enough for standard, cheaper loans. That left high street payday loan providers – which work in very similar way to Wonga, with virtually none of the media coverage – but they require you to make it to their buildings in office hours. Convenience matters.

    Other options included pawning my laptop – in my case, the only thing I had that was worth enough to bother – which would have put at stake something I absolutely could not have lost. Or to try to hastily sell items secondhand – a method which can only work for so long.

    Credit unions, cheered on as the supposed fix for situations like these, are in practice slow to lend – useless if you’re trying at short notice to avoid bouncing a bill payment – and are often more conservative than other lenders, especially when refusal is not only humiliating but also hurts credit ratings.

    And that is to say nothing of loan sharks, or similar, less savoury alternatives. We might not like lenders such as Wonga, but their disappearance would help no one, especially as regulators had finally taken action to cap interest rates, charges and other fees, making it harder for companies to roll over loans, which was often when the worse problems began.

    Wonga is a symptom of a society in which millions of people – millions of families – can’t make enough money to get by, even on essentials. The companies and services that grow up out of a society in that situation are often not palatable, but they’re rarely the real driver of the problem. There are exceptions – if you want a type of company which genuinely makes the problems still worse, look no further than weekly hire-purchase companies such as BrightHouse, which charge people huge overall sums.

    If Wonga disappeared tomorrow – which it won’t; in practice it would likely be bought up from administration immediately – many would cheer, but for many people who used it, it would merely make their already bad situation slightly worse.

    Wonga helped me, and doubtless helped plenty of other people. They deserve zero credit or praise for that, and surely harmed many others. But too many people who write about struggling to get by never have, and so misunderstand where the problems really are.

    Let’s spend less time worrying about Wonga, and more worrying about why people need to use it.
     
  6. DavidF's Avatar

    DavidF said:

    Default Re: Wonga collapses into administration

    Alternative answer.... It is apparent that the education system and other factors such as parents and legislation have failed you badly.
    £80 per month spare? An emergency fund should be built up ASAP. One that covers all emergency stuff. Lots of people have even less than that spare... And if you were one of the people with nothing spare wonga STILL would not solve the problem of outgoings being greater than income... Simple maths tells us this.
    You should have been educated in how to manage finances... You should have bought a second set of keys at a fraction of the price.. You should move somewhere cheaper.. You should shop smart and cook in bulk from raw ingredients... You should try to better yourself job wise.... All of these things could lead to a better quality of life.... Wonga loans no matter how small will never ever solve the underlying problem which is you do not earn enough to cover your outgoings....

    I sound like a pompous cnut there.... I have had many loans and "been there"... Managed to pay some and got others written off.... What I am getting at is if I knew then what I know now.... And to be honest we are all the same... This shit should be taught in school. Household finances and budgeting..... None of our grandparents had this shit... They had stories of when they had nothing ect but they found a way and survived... They didn't have to pay for one calamity with ten years of debt..

    Wonga and their ilk are parasites and should be outlawed in the same manner as loan sharks. They drive more people to suicide than the "issues" they claim to be there to help with.

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  7. piggzy's Avatar

    piggzy said:

    Default Re: Wonga collapses into administration

    They should have "axed oakham"