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| A passenger sits on a bus beneath an advert for short term loan company Wonga in London |
Britain’s biggest payday lender Wonga Group collapsed on Thursday, saying it had decided to put its UK operations into administration.
Privately owned Wonga, which initially enjoyed rapid growth via its short-term, high-interest lending often to troubled borrowers, fell into difficulty after regulatory scrutiny of so-called payday lenders led to a cap on interest rates.
“A decision has been taken to place Wonga Group Limited, WDFC UK Limited, Wonga Worldwide Limited and WDFC Services Limited into administration,” Wonga said in an email.
“The Boards of these entities have assessed all options regarding the future of the group and have concluded that it is appropriate to place the businesses into administration,” it said.
Wonga said its overseas businesses were not part of the announcement.
Wonga said in its statement that its UK business would not be accepting new loan applications, but its customers could continue to use its services to manage existing loans.
Wonga had just raised 10 million pounds ($13.01 million)from investors amid a surge in compensation claims related to loans taken out before 2014.
Britain’s payday lending industry has been heavily criticised by campaigners who say its high interest rates and marketing tactics have been unfair for vulnerable borrowers.
Wonga shot to prominence in the years after the financial crisis, filling the gap left by big banks as they retreated from short-term lending. At its peak in 2012, it was making a pretax profit of over 1.5 million pounds per week.
Wonga is now in the process of appointing Grant Thornton as administrators. The company’s most recent accounts show it made a loss of 66.5 million pounds in 2016.
