In stark contrast to the height of its success in 2013 with over a million customers, Wonga has finally had a taste of its own medicine. With the shoe firmly on the other foot in its financial struggle to stay afloat, it has been booted into administration. But although no one else will now fall prey to its services, is the collapse of Wonga really a reason for triumphant celebration?
In 2014, Wonga’s debt collection practices were found to be unfair by the by the Financial Conduct Authority and the company was ordered to pay £2.6 million in compensation. In addition, a cap was placed on payday loan charges and tougher regulation introduced. As a result, profits were hit hard and in 2016 the company’s pre tax losses were reported as being £65 million.
The news that Wonga has gone into administration has been greeted with jubilance and the payday loan company, which has been described as a toxic symbol of Britain’s household debt crisis is now no more. But is this a win for Wonga’s current customers who have taken out loans, the customers who are seeking compensation, the x amount of jobs now at risk and those who would have turned to the finance of Wonga in their time of need but now will not have the ability to do so? No it is not.
Currently there are approximately 200,000 Wonga customers who owe over £400 million in short term loans. The debts still stand and they will need to continue making payments until loans are repaid, as administrators will no doubt just transfer Wonga’s debtor list to another company to pursue. The debt will not be written off. Those who borrowed will be under the same pressure as before to repay their loans and in many cases, will be unable to do so.
Despite having raised over £10 million from investors. Wonga has been unable to survive the cap placed on its interest rates, the decline in popularity of the payday loans and the millions of pounds of compensation claims. Those who were in the process of claiming will now have to wait their turn for a payout from sales of assets and have no real assurances that they will ever see what they are owed.
The majority of the 500 jobs at risk of loss due to the collapse of Wonga are in the London area where the pay lending company had its head office. The future for these employees is currently bleak and uncertain and provides most definitely no reason to celebrate. There are no winners for those who worked for Wonga and even the CEO herself may very soon not be CEO of very much and will have very little, if anything, to walk off into the sunset with when the dust has settled.
Wonga may be no longer but this type of company existed because of the demand for its services, which worryingly remains the same with UK debt at an all time high. Although responsible credit providers do exist, they are few and far between and people will just seek alternative ways to cover their debts instead. The vulnerable will still remain vulnerable and with the collapse of Wonga, even worse companies may now step in.
The only real bonus is that Wonga has received its financial just deserts. As for the lives of the people it has destroyed along the way, there can be little to celebrate apart from the deserved demise of a company, which took such blatantly shocking advantage of those who had no other choice but to rely on it services. It’s a sad sign of the times and unless there is intervention on a number of levels, it’s a very worrying indication of what is yet to come and I certainly won’t be popping any champagne corks anytime soon.