The End of Wonga?

August 9, 2018 10:00 am Published by Debt Free Life

Wonga is a ruthless, vicious, and exploitative company which has caused outright misery for tens of thousands of Britons over the years. However, firm action by the government seems to finally be taking effect as they needed to be saved by an emergency £10,000,000 loan.

Wonga on the Edge

Wonga is a name most people in the UK are familiar with. It was by far the country’s biggest payday lender and carried out extensive marketing campaigns for so many years that it felt they would never go away.

However, Wonga is in an unstable position following governmental legislation. Their situation was so dire that they required a cash injection of £10m from the company’s shareholders in order to keep them from going out of business.

Wonga has claimed that the need for the money is due to an influx of former customers reaching out to the company for compensation. Due to heavy criticism about the manipulative practices of Wonga, they are now in a tricky position.

Wonga on the Edge

The majority of the claims will come from customers who have been taken out loans from before 2014. The government took significant steps to curb the effects of payday companies and capped the fees and interest rates which made borrowing so critically expensive.

Activists were also outraged about the unfair marketing techniques that companies like Wonga employed. Not only were they offering expensive loans, but they were also targeting the most vulnerable people in the country knowing fine well that they would struggle to make the repayments and rack up unmanageable bills as fees built up.

A spokesman for Wonga denied any severe issues within the company, stating that the shareholders were “fully supportive” of the company’s plan for moving the business forward.

What Does This Mean for Wonga?

In the grand scheme of things, £10m isn’t a massive amount of money for a company like Wonga. The chances are they will be fine, provided that their plan of adapting the company to comply with new legislation is actually profitable.

In 2014, a cap of 0.8% of the amount borrowed per day was introduced by the Financial Conduct Authority (FCA) to limit the effects of payday loans. Another rule was added that capped the interest so that it could go no higher than the total borrowed initially.

These new rules meant that Wonga had to revolutionise its entire business model and make significant changes to comply with the FCA’s new regulations. In 2016 this meant that they suffered a loss amounting to a near £65,000,000, despite being confident they would return back to profitability in the following year.

In short, Wonga will very likely adapt and survive this rocky period in their history. However, if they hope to come out the other side, they will need to be much fairer on the consumer and will likely be significantly less profitable.

As their profits drop and marketing campaigns start to diminish, there is a good chance they will gradually sink away into obscurity.

Although this sounds like good news, there is a good chance that some other unethical and exploitative company will just rise and take its place.

Help with Payday Loan Debt

As we mentioned, payday loans affect tens of thousands of people throughout the country each and every day. While the legislation introduced has helped to minimise the effects of these companies, they can still cause severe issues, and many people are still dealing with loans from back before the legislation was introduced.

However, because payday loans are ‘unsecured’, it means they are eligible to be included in all of the debt solutions that we offer, including:

  • Trust Deeds and IVAs
  • Bankruptcy and Sequestration
  • DAS and DMP

Help with Payday Loan Debt

Entering into a solution with debt free life will provide a range of benefits. Firstly, many offer the opportunity to write off significant amounts of debt. Trust Deeds, for example, can allow you to avoid paying as much as 85% of the total you owe.

Additionally, if you have multiple debts, you will instead be allowed to pay one single monthly sum. Moreover, the amount you have to pay will be significantly reduced and based upon what you can afford.

In addition, creditor harassment will be immediately brought to an end as your creditors will not legally be allowed to contact you by any means.

Get in Touch

If you are in debt to a payday loan company, or any other creditor, debt free life can help you to negotiate your way out of it and assist you in taking back control of your finances. Opening up about debt isn’t easy, but our advisers are only a phone call away and ready to offer any help you need to get through to the other side.

To get in touch with us now, give us a call on 0800 808 5124.

Alternatively, fill in our debt calculator, and one of our advisers will be in touch as soon as possible.

 

 

 

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