Wonga to cancel 330,000 customer debts
Another 45,000 customers who are in arrears between up to 29 days will be asked to repay their debt without interest or charges over an extended period of four months.
Wonga has also introduced new affordability checks, after the Financial Conduct Authority (FCA) found it was not taking adequate steps to assess its customers' ability to meet their monthly repayments.
The controversial company will be writing to all its customers by 10 October to inform them if they are included in the redress programme.
Earlier this week, Wonga announced its profits had halved after it was forced to pay £10 million to customers it threatened with fake legal letters.
It has now entered into an agreement with the Financial Conduct Authority (FCA) compelling it to make significant changes to its operations, following an investigation of its business practices.
Andy Haste, Wonga group chairman, who joined the company in July, said it was now committed to lending in a responsible manner.
"We want to ensure we only lend to those who can reasonably afford the loan in question and during my review, it became clear to me that this has unfortunately not always been the case," he said.
"I agreed with the concerns expressed by the FCA and as a consequence of our discussions we have committed to taking these actions."
Clive Adamson director of supervision at the FCA said: "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.
"It is absolutely right that Wonga's new management team has acted quickly to put things right for their customers after these issues were raised by the FCA."
Short-term cash loans designed to be borrowed mid-way through the month to tide the borrower over until they next get paid, whereupon the loan is settled. Generally used by people with bad credit ratings and/or no access to short-term credit such as an overdraft or credit card. Like logbook loans, this type of borrowing is hugely expensive: the average APR on payday loans is well over 1,000% and in some instances can be considerably more.
“Arrears” tend to be associated with debt. If you fall behind and miss payments on any outstanding debt, the amount you failed to pay is an arrear – the amount accrued from the date on which the first missed payment was due.