If you hold a current loan with Wonga, you may well be quite excited at the prospect of them falling into the hands of the administrators, hoping that your loan with them will be written off.
Sadly, that’s not going to happen.
As much as for many this divine act or retribution appears as the ultimate case of karma for a company who abused its position to make unfair sums of money from those who really couldn’t afford it, as we rub our hands together in delight that they’re finally getting what they deserve, once again it’s probably going to be the man on the street who comes out faring the worst.
By handing all responsibility over to the administrators it appears so far that the thousands of cases of unpaid compensation could remain just that. By holding their hands up and admitting they’ve run out of the required funds to keep the doors open, it doesn’t seem likely that there will be enough to cover the current and increasing new compensation claims piling up against them as well as their existing business finances.
So for the hope that karma was about to make things right for the Wonga customer, that he would get his reward for the financial abuse he suffered, it actually looks a little less likely than ever.
Keep making your payments
If you’ve already considered, or stopped your repayments to this household payday loan giant, then you should start them up again immediately. Your loan is still an active legal contract and you are fully liable to pay the complete amount. In fact, Wonga states quite clearly that if you miss a payment you will be subject to a £15 fine if you don’t cover the amount within 3 days of the date it was due.
Just because the company has admitted it’s financial position to be unmanageable and has handed over the financial responsibility of going out of business to the administrators doesn’t mean that the doors are shut, all agreements are null and void, and from there on there’s a clean sheet from where to start again. In fact, it’s quite the opposite. Apart from the fact they have ceased to accept new customers, their existing business is one of the main means they have of recovering capital to repay some of the mass of debts they’ve accrued over the past 4 years.
Where the problem started
In 2014 the Financial Conduct Authority ordered Wonga, and any other payday loan companies found to breaking the regulations of what was considered to be irresponsible lending, to provide compensation to customers who were mis-sold loans on those grounds. Mis-sold loans due to irresponsible lending were those that weren’t properly investigated to be sure that the debtor’s income was sufficient to repay the total loan amount including interest without having to seek additional income from further loans or financial assistance. In Wonga’s case this meant writing off £220 million of debt to 330,000 of their customers. After the order was announced loan management companies found it to be an easy in option to market compensation claims for anyone entitled utilising their expertise. The amount of claims made against these offending payday lenders has brought a wide selection to their knees and into the hands of the administrators.
If you have an existing Wonga loan
Keep paying it as you always have. Anything that happens between the administrators and Wonga will be handled in due course and you will be made aware of any changes required by law or that are in your best interests.
The only likely change will be if the administrators decide to sell off existing loans to make assets available in order to pay off or to settle as many of the financial arrangements as possible to both secured (banks, businesses and other financial institutions) and unsecured (customers and compensation claimants) parties as soon possible.
If your loan is sold to another company, or if the administrators remain responsible for the collection of payments, it is still highly unlikely that it will affect you. None of the terms and conditions in your original contract will change, all interest rates and repayment terms will stand exactly as agreed.
What about those with compensation claims?
If your compensation claim has been approved, and an amount has been agreed for repayment, you will likely be held as a higher priority case than new or existing claims not yet considered or agreed upon.
Given the financial ill health of the company that has forced them into the administration process it seems unlikely that it will have enough funds to make all of the payments it’s responsible for.
If your claim was being handled directly by Wonga or by the Financial Ombudsman Service you should continue to pursue your case with them using your existing methods. Any new claims will be made directly to the administrators. The FSO will not be responsible for assessing any of the new cases that would previously have fallen within their jurisdiction through the Financial Services Compensation Scheme.
If you were thinking of making a claim, should you still bother?
If you don’t ask, you don’t get. If you’ve really got nothing to lose by putting a claim in then why not? Well, you just never know do you?
Wonga aren’t the first payday lender to suffer at the hands of the FCA’s ruling that has led to collapse. Some of those previous lenders continued to pay compensation claims for years; others only managed a few months of trying to meet their obligations before they ran out of the funds required to cover them.
What if I was mis-sold a loan by another lender?
If the current trends are anything to go by we should learn from them — if you believe you were mis-sold a payday loan that breaks the regulations laid out by the FCA then you should complete your claim application before they suffer the same financial situation Wonga are in.
If you’re going to give yourself the best chance of retrieving what you rightfully deserve, make sure you do it while they still have the finances to make it happen.
*Up to 85% of debt can be written off in some individual cases. Depending on your own situation, the amount which can be written off will vary from person to person. Realistic levels of debt to be written off are between 20% and 85%, however this depends on your current credit policy, income and personal assets.
Your information will be passed to a third party organisation working on a model of none advice. These advisors will be able to talk through IVA (Individual Voluntary Arrangement) opportunities with people within England, Wales and Northern Ireland. Help can only be offered following a thorough fact-finding process. When an individual meets the required criteria for an IVA, advice can then be provided.
Help and advice given will be through registered insolvency practitioners with all necessary expertise. Debt Advisory Service, along with any third-party organisations, will not give advice with regards to Debt Management Plans (DMPs). Professional debt counselling and credit services are available free of charge from specialist Money Advice Services.
If Debt Management is the option you want to proceed with, All advice will be provided by the Debt Management company.