Hot on the heels of Wonga’s profits dramatically tumbling, more bad news revealed last week for the legal loan shark.
Last Tuesday brought the revelation that Wonga’s profits had been badly hit, by having to pay out cash to customers they had overcharged and to customers sent fake letters from non-existent legal firms.
When revealing this downturn in the Newcastle United sponsor’s fortunes, Wonga had also admitted that they expected the company to be ‘smaller and less profitable’ moving forward. This being partly down to new controls set by the regulator, the FCA, who had forced Wonga to increase affordability checks as well as limiting roll overs of loans, these measures coming into effect three months ago in July.
The full impact of just how hard this is going to hit Wonga emerged on Friday, with the company having to write off a total of £220m worth of debt belonging to 330,000 of their customers, after they admitted making loans to people that couldn’t afford to pay them.
On top of this, Wonga will also have to take on £35m in extra costs, these relating to another 45,000 customers who they can’t impose charges and fees on.
The net effect of this action means that around 330,000 customers who are over 30 days in arrears will owe nothing and have their balance entirely written off, while another 45,000 who are less than 30 days in arrears will not have to pay interest and charges and just have to repay the debt.
Andy Haste, Wonga’s new Chairman, accepted the need for change was ‘real and urgent’ and that the new changes mean that due to tighter lending criteria, far fewer loans will be issued.
The customers benefiting from these actions forced on Wonga, amount to roughly a fifth of the 1.8m customers to use the company in its 7 year history.
How this downturn in Wonga fortunes impacts on their relationship with Newcastle United remains to be seen.
There was mass opposition from both fans and the general public of Tyneside when Newcastle United struck the deal with Wonga. Many supporters feeling that the choice of sponsor sent out the wrong message as a partner of our great football club.
At the time of the ‘Fake law firms’ scandal, NUST posed the following “It is surely now the time that Mike Ashley must look again at this relationship between the Newcastle United and Wonga, is it really the kind of partnership that the football club should be continuing with?”
3 months later we are asking again; “Why don’t Newcastle United dump this disgraceful sponsor?”