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Wonga Might Be Uniquely Unscrupulous, But the Whole Commercial Banking System is Out to Get Us
Grace Blakeley - 28 August 2018
This month, Wonga – the infamous payday lender – has found itself in financial difficulties. The trouble started when a clampdown on payday lending in 2013 brought some of the industry’s less scrupulous practices to light. Many payday lenders were accused of targeting vulnerable customers with extremely high interest rates, deceptive advertising, and aggressive debt collection practices.
In 2014, the Financial Conduct Authority (FCA) imposed limits on the amounts payday lenders were able to charge in interest, which has hit profits. But the real source of Wonga’s difficulties has been the dramatic hike in compensation claims from customers who took out loans before 2013. The increased scrutiny to which payday lenders were subjected led to a spike in cases brought against them by claims management companies.
Wonga’s fall from grace has been quite dramatic. In 2011, the company was making £45m in profits on revenues of £185m. Some estimated it was worth up to $1bn. When regulators finally caught up with the payday lenders the party stopped pretty quickly. In 2015, Wonga reported losses of £80m, followed by further losses of £66m in 2016. Today, it is worth just $30m.... See more
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