Wonga stops taking new loan applications as lender heads for collapse

Wonga has stopped taking new loan applications as the struggling payday lender teeters on the brink of collapse.

Wonga has lined up potential administrators after a surge in compensation claims pushed the payday lender to the brink of collapse. Picture: PA Wire

The news comes days after it emerged that the company had lined up Grant Thornton to act as administrator in case the lender’s board decides it cannot be rescued.

A statement on its website read: “While it continues to assess its options Wonga has decided to stop taking loan applications.

“If you are an existing customer you can continue to use our services to manage your loan.”

On Wednesday, Wonga held emergency talks with the Financial Conduct Authority over the impact of its collapse on existing customers.

It is thought the company will make an announcement later on Thursday regarding its future.

Investors in Wonga include Balderton Capital, Accel Partners and 83North.

Over the weekend, Wonga said it is “considering all options”, just weeks after shareholders pumped in £10 million in a bid to save it from going bust.

Earlier this month, the lender said its struggles were due to a “significant” increase industry-wide in people making claims in relation to historic loans.

It blamed claims management companies for the rise, but said it was making progress against a transformation plan set out for the business.

On Sunday, Wonga said the number of complaints related to UK loans taken out before 2014 had “accelerated further”.

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

Wonga has faced a barrage of criticism over the high interest it charges on its loans and it has been accused of targeting those who are vulnerable.

In 2014, the firm introduced a new management team and wrote off £220 million of debt belonging to 330,000 customers after admitting making loans to people who could not afford to repay them.

In the same year, the FCA said it would bring in stricter affordability checks to the industry and introduce a cap on the cost of payday loans on the amount borrowed per day.