At its peak, Wonga was hailed as a trailblazing tech company which had attracted investment from huge venture capitalists in the UK and Israel, and was heading for a £1 billion flotation on the London Stock Exchange. The firm felt the effects of strict FCA regulation introduced in 2015 and following over £400 million worth of claims from ex-customers, Wonga fell into administration in August 2018.
Wonga’s administrators, Grant Thornton, set up an online portal to make it easier for borrowers to make claims against Wonga on their mis-sold loans, the application claimed to have only taken a few minutes long. This portal is now closed, and those who have missed the deadline for making claims will now no longer be able to make a claim against the collapsed payday lender.
Claims made via Thornton’s online portal will be assessed on numerous different important factors; including how many loans the applicant had, the applicant’s income, and the total value of the loan.
Whilst there are many applicants who have been deemed eligible for compensation, this compensation is not guaranteed for all. However, those who make valid claims will be marked as being owed money for their mis-sold loan. A recent figure has valued the compensation bill at £460 million with the average compensation claim per applicant being £1,181. This figure was valued before the portal closed, and some sources say it could be four times this number.
Administrators have further warned that compensation for those eligible will not necessarily be paid out in full. Experts in the field, such as debt adviser Sara Williams, have advised that “If you are due a refund, you may not get paid the full amount. I will be surprised if you get more than 10% of it. That is a disgrace and the UK regulators should be ashamed that they allowed so many payday lenders to profit from people’s desperation for so long.”
However, Williams continues that “it is so easy to make a claim to Wonga that this is still worth doing” and you are considered eligible on the basis that “you could only repay (a Wonga loan) by falling behind on other debts and bills or by borrowing more”.
Administrators hope to start paying in compensation to those who have been mis-sold to by the end of January 2020. During the beginning of the year (February) the Treasury Committee stated that Wonga was bringing financial harm to its customers from “beyond the grave” with the number of people waiting for ombudsman rulings estimated to be over 400,000.
The collapse of Wonga and other similar lenders such as The Money Shop and WageDay Advance has shifted the industry towards longer term loans, such as those offered by Badger Loans and The One Stop Money Shop – giving customers up to 12 months to spread repayment and the flexibility to repay in instalments and early repayment if they have the means to do so.
Elsewhere in short term lending, there has been continued growth for secured lending which allows borrowers to leverage assets and collateral to borrow money. This includes the popularity of bridging finance, which has grown from lending out £1 billion in 2011 to £7 billion in 2018 and a similar trend for development finance too.
Equity release, allowing homeowner to extra value from their home, has also seen a huge rise, with over £4 billion lent out last year alone.