Payday lender Wonga has announced plans to file for administration.
The struggling firm closed its doors to new loan applications earlier today. After considering its options, it concluded that it was “appropriate to place the business into administration”.
Grant Thornton has been appointed as the administrator. Only Wonga’s UK company will be placed into administration, while its overseas businesses in Poland, South Africa and Spain will continue to trade.
The troubled lender had been loss-making for several years, after thousands of customers claimed compensation for being sold a loan they could not afford and incurring excessive interest charges.
The firm was forced to write off £220 million-worth of debt belonging to 330,000 customers in 2014. At the time, they were ordered by the Financial Conduct Authority, the financial watchdog, to pay £2.6 million in compensation to 45,000 customers.
Wonga received a £10 million emergency cash injection from shareholders just three weeks ago, but the lender said this simply led to a further deluge of new compensation claims.
Wonga has confirmed that customers with current loans can continue to use its services but the UK business will not accept any new loan applications.
Continue to make payments
Caroline Siarkiewicz, head of UK debt advice at Money Advice Service, says Wonga's customers must continue to make payments as normal.
"Regardless of ongoing speculation over the future of Wonga, customers who have entered into a loan agreement must fulfil it," she says.
Earlier today Stephen Wainwright, partner at business recovery firm Poppleton and Appleby, echoed these sentiments.
“If you have a contract with them you have to continue servicing these loans until told otherwise. If the company goes into administration and the loan book is sold, customers still have to pay the loans back.”
Consumers still looking to claim compensation from Wonga may find that their settlement is not paid. Claims are usually settled in a matter of weeks but if a company goes into administration before a settlement has been reached the customer is unlikely to receive a payout.
If the claim has been agreed but not paid, the claimant will join the list of creditors.
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