In 2014, Wonga was made to write off £220m in loans for 375,000 borrowers that should never have been given loans in the first place. Wonga admitted that these borrowers shouldn’t have been given the loans in the first place, as they were never financially viable to qualify for a regular bank or other reputable loan company.
Wonga was accused of ‘legal loan sharking’ by MP’s who then ruled that the company should write off all of these debts and scrap interest and charges owed by remaining customers. However, Wonga always refused to say the original value of the loans. They also wouldn’t reveal how long these debts had been outstanding, which implies they know they were in the wrong. So many people who used Wonga were living on unemployment or disability benefits and the company knew they could not ever make the repayments. The company was accused of ruining lives by irresponsibly lending and not taking responsibility for their borrowers’ wellbeing.
The company lent to people who had poor credit and didn’t do proper credit checks beforehand. These people would not have been approved for loans from other more reputable sources, because of their credit score, and their ability – or lack thereof – to pay it back. Many people who used Wonga did so because they were in a financial dilemma where they had bills to pay but were either waiting on paychecks to come through or had recently lost their jobs. Wonga seemed like a great option for these people because of their instant approval and money in your account within minutes.
However, Wonga had extortionate interest fees and the people who were borrowing from them couldn’t afford to pay back the interest fees on top of the original amount they had borrowed. Wonga should not have lent to people without doing proper background and credit checks and should have adjusted the amount borrowed and the interest fees accordingly. Unfortunately for so many people, Wonga seemed like a great idea at the time but turned out to be one of the biggest regrets of their life.
Accused of irresponsible lending, Wonga marketed themselves as the payday lender you could trust. This couldn’t be further from the truth. Many hundreds of Wonga users ended up in a circle of borrowing and paying back due to their poor credit score or low income. Many users of Wonga had to continue to borrow from them in order to pay their original loan. This continued for so long because people weren’t earning enough to pay back their original loan with the massive interest rates on top. A fact that Wonga was well aware of.
If Wonga had done more thorough background checks or even asked more questions to their users before lending the money, so many hundreds of different people would not be in the position they are now. Wonga would also not have had to write off all the millions in loans that people could not afford to pay back. This puts Wonga in a really awkward position because this paying off is going to cause huge financial repercussions for this payday loan company. Although the directors say that they have put contingencies in place to cover them, and are undergoing a massive overhaul to make Wonga a reputable company again. They still have a long way to go before people will trust them again.
If you’ve ever borrowed from Wonga and found yourself in a position where you can’t pay your loan back, or if you tried to explain it to them and were met with automated voicemails or rude customer service assistants then we can help you. Get in contact today to see what we can do for you.