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UK payday lender Wonga 'on brink of collapse'

A deluge of customer compensation claims could sink the lender, according to UK news reports.

Image: Nick Ansell/PA Images

PAYDAY LENDER WONGA could be set to collapse as it faces an abundance of customer compensation claims.

The company has lined up Grant Thornton to act as administrators if it becomes insolvent, Sky News reported.

Wonga has declined rapidly since a clampdown on high interest lenders from the UK government a number of years ago.

Critics had claimed that services such as Wonga targeted vulnerable people with their high interest rates.

The company launched in 2007 and grew up a large loan book as the global banking crisis gave way to recession across Europe.

In a statement, a Wonga spokesperson told the BBC that there’s been a “significant increase in legacy loan complaints seen across the UK short-term credit industry”.

“Against this claims backdrop, the Wonga board continues to assess all options regarding the future of the group and all of its entities,” the spokesperson said.

Problems began to arise for Wonga in 2014, when the UK government introduced regulations restricting the rates lenders could charge.

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Furthermore, the Financial Conduct Authority ruled that some of its debt collection practices were unfair to consumers.

Previously, it could charge interest rates of up to 5,800%.

After the crackdown on high interest lending, the company agreed to pay €2.6 million in compensation to 45,000 after sending legal letters from fake law firms. It also wrote down the debt of 330,000 customers, wiping £220 million of debt.

The company previously had an office in Dublin, but shed 175 jobs there in 2015.

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Sean Murray

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