RegulationOct 2 2014

FCA tells Wonga to write off loans with 330,000 customers

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The Financial Conduct Authority has told payday loan company Wonga to write off loans with approximately 330,000 customers as part of its “remedial redress”.

Wonga has entered into a voluntary requirement agreement with the regulator requiring it to make immediate and significant changes to its business.

When it took over regulation of consumer credit in April of this year, the FCA requested information about the volume of Wonga’s re-lending rates. The information received suggested that Wonga was not taking adequate steps to assess customers’ ability to meet repayments in a sustainable manner.

The regulator has agreed an approach with Wonga for remedial redress for those customers who were affected by inadequate affordability assessments, with approximately 330,000 customers who are currently in excess of 30 days in arrears, having the balance of their loan written off and owing Wonga nothing.

Approximately 45,000 customers who are between 0 and 29 days in arrears will be asked to repay their debt without interest and charges, while being given an option of paying off their debt over an extended period of four months.

Wonga will contact all customers by 10 October to notify them if they will be included in the redress programme.

Clive Adamson, director of supervision at the FCA, stated: “We are determined to drive up standards in the consumer credit market and it is disappointing that some firms still have a way to go to meet our expectations.

“This should put the rest of the industry on notice – they need to lend affordably and responsibly.”

Mr Adamson added that it was “absolutely right” that Wonga’s new management team acted quickly to put things right for their customers after issues were raised.

Wonga has introduced new interim lending criteria that should improve customer outcomes and is also working to put in place a permanent lending decision platform as soon as possible.

The FCA also required the firm to appoint a skilled person to monitor the new lending decision platform to ensure it has the desired effect.