Wonga boss scraps 330,000 debts in bid for fresh start
Embattled lender clears decks following steep decline in profits, with major customer forbearance scheme underway
Wonga chief executive Andy Haste has announced sweeping measures to put the company back on safe ground, following a year wracked by legal problems and sliding profits.
As Insights reported in July, Haste gave himself a mandate for change at Wonga from the word go. Today’s statement indicates that the effects of his management are now well underway, as the company aims to clear the decks for a fresh start and recover from a rocky year. In April, a Wonga advert was banned by the Advertising Standards Authority (ASA) for saying that charging an interest rate of 5,853% was “irrelevant”. Two months later, the company came under intense regulatory and legal pressure following its admission that it had used fake law-firm identities to hassle customers for repayments. And just this week, the company posted a 53% fall in profits, for the year up to 31 December 2013.
Haste’s steps for arresting the company’s decline are:
Around 330,000 customers who were in arrears of 30 days or more up to 2 October will have their debts written off
Another 45,000 customers who were in arrears of up to 29 days upon 2 October will be asked to repay their debts without interest or charges
That second group will also be given the option of paying off their debts over an extended, four-month period
Wonga’s lending criteria will be strengthened to address issues of affordability and repeat borrowing
The firm will move to a new lending-decisions engine to ensure that it lends sustainably and delivers appropriate outcomes for customers
Haste said: “When I joined Wonga I was made aware of concerns the Financial Conduct Authority (FCA) had already expressed around affordable lending – concerns which I shared.
“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. I agreed with the concerns expressed by the FCA and, as a consequence of our discussions, we have committed to taking these actions.”
He added: “It’s clear to me that the need for change at Wonga is real and urgent. Our regulator is determined to improve standards in consumer credit, and I share that determination. There is much to do in order to make Wonga a sustainable and accepted business, and today’s announcement is a significant step forward in that process.”
Wonga will now work with a third party – appointed in conjunction with the FCA – which will oversee the implementation of the new decisions engine and ensure it delivers appropriate customer outcomes. In the meantime, the company will be accepting “significantly fewer” loan applications.
For more on these issues, check out the CMI Change Management Toolkit.