The Collapse of Wonga: What Happened and What to Expect

11May 2023 by Oliver 303 Comments

Wonga, the UK-based payday loan company, has stopped issuing loans and entered administration in August 2018. The company’s collapse followed a surge in compensation claims amid a government clampdown. Wonga’s customers have been left in limbo, with many struggling to get information and contact the company. Here is what happened and what to expect.

The Woes of Wonga Users

Wonga’s customers have faced a range of issues, from difficulties in contacting the company to problems with their accounts. Many customers have complained about the lack of information and support from Wonga. Some have reported that they cannot access their accounts or have been charged incorrect amounts. Others have struggled to get in touch with Wonga’s customer service team.

The Chronology of the Collapse of Wonga

Wonga was founded in 2006 and launched its website in 2007, offering loans of up to £1,000 repaid after up to 30 days. The company grew quickly, backed by private equity investors, and was feted as one of a new breed of digital innovators in the finance industry. However, political pressure started to build against payday lenders as stories emerged of vulnerable customers struggling to repay. Wonga’s profit tripled in 2011 to £45.8m on revenues of £185m as the company made 2.5m loans. But then, in 2013, came a regulatory clampdown as the Office for Fair Trading ordered payday lenders to clean up their businesses and the Financial Conduct Authority announced a cap on the total cost of a loan. Wonga has been hit by an unexpected surge in customer compensation claims linked to loans it made before 2014. That year, an FCA crackdown prompted Wonga to write off £220m in debts and interest for 330,000 customers. But claims management firms that are targeting payday lenders have set off a renewed torrent of complaints. Wonga’s maximum compensation payout is expected to be just £118 per customer.

The Administration Process

Wonga entered administration in August 2018, and the administration process was completed in August 2020. The company was finally dissolved in December 2020. The administrators assessed all claims for refunds and set out the reasons why Wonga went into administration. These were the increasing number of affordability complaints, especially from claims companies, and the decision by the Financial Ombudsman that FOS could look at loans over 6 years old, going back to 2007. There were 24,000 affordability complaints awaiting a decision by Wonga and 9,500 complaints against Wonga with the Financial Ombudsman when Wonga ceased trading on 30 August 2018. The administrators proposed that only £41m would be put aside for claimants, which means that customers who were mis-sold loans by Wonga are expected to receive less than 10% of what they are owed in compensation[9]. The repayments will still have to be made, and overseen by the administrators, but there is no practical difference in the way that these payments are made.

Ultimately, Wonga’s collapse has left many customers in a difficult situation, with very little information and support from the company. The administration process has been completed, and customers who were mis-sold loans by Wonga are expected to receive less than 10% of what they are owed in compensation – As outlined in our readers comments and snippets further down this article.

The Chronology of unfortunate Wonga events

Date	Event
October 2006	Wonga was founded by Errol Damelin and Jonty Hurwitz
April 2007	Wonga launches beta version of its website, offering loans of up to £1,000 repaid after up to 30 days
July 2008	Full launch of Wonga. At this point, the firm employs 37 staff in London with a development team in Ukraine
March 2013	The Office of Fair Trading (OFT) gives lenders including Wonga 12 weeks to change their business practices after stories emerge of vulnerable customers struggling to repay
June 2014	Wonga is censured for issuing fake legal letters to customers in arrears and is ordered to pay compensation of £2.6m
July 2014	Wonga agrees to write off the loans of 330,000 customers, as well as waive the interest and fees for an additional 45,000, after admitting its algorithmic technology had been lending money to people who couldn’t pay it back
October 2014	An FCA crackdown prompts Wonga to write off £220m in debts and interest for 330,000 customers
September 2015	Wonga and other payday lenders are hit by a cap on interest rates that ruined its business model
August 2018	Wonga collapsed into administration after it was brought down by a more recent flood of compensation claims
October 2018	The Wonga Administrators sent a letter to some of Wonga’s creditors with their proposals to handle the administration
August 2020	The administration of WDFC, the legal company that operated the Wonga brand, was completed
December 2020	The company was finally dissolved

The administrators assessed all claims using an automated tool, which took account of all loans, interest, and fees paid, and any payments made towards the loan. They then proposed that only £41m would be put aside for claimants, which means that customers who were mis-sold loans by Wonga are expected to receive less than 10% of what they are owed in compensation. The repayments will still have to be made, overseen by the administrators, but there is no practical difference in the way that these payments are made. The reasons for Wonga’s administration were the increasing number of affordability complaints, especially from claims companies, and the decision by the Financial Ombudsman that FOS could look at loans over 6 years old, going back to 2007. There were 24,000 affordability complaints awaiting a decision by Wonga and 9,500 complaints against Wonga with the Financial Ombudsman when Wonga ceased trading on 30 August 2018

This article is being updated following the January 10th emails that were sent out to previous Wonga loan customers. During the course of 2019 after Wonga’s demise into administration, customers have been following the Wonga story closely. This is following the collapse of Wonga on the 30th of August 2018 when they were unable to pay refunds on all the affordability complaints they were getting. This post has been updated to show the latest developments along with a rough timeline of what’s happened so far. As a side note, you can find out about the similar Sunny administrators and Moneyshop claim updates.

4.3p in the pound – Wonga Administrator Announcement (WDFC).

As of 29th of January 2020, the administrators at Wonga announced a 4.3 pence in every pound repayment would be made to all customers that were successful in their claims for unaffordable lending via Wonga. In theory those that are successful should receive their payments over the next four weeks, a contradiction to the original payment promise of the end of January originally stated by the administrators.

By January 31st 2020 most customers will have received email stating what they will receive. Customers are being advised to contact the administrators of Wonga debacle via 020 7138 8330 for further advice if they have not received an email.

The disappointing news that only 4.3 pence in every pound is being refunded shocked by readers as you can see from the statements at the base of this post. One reader, Jenna stated:

“I’ve received the email and I’m getting £67 based on a £1400 payout”

While Justine was equally disappointed:

“My claim was for £7160 received my confirmation email at 18;04 today saying you are awarded 4.3p to the £ total claim I got back is £308 and it will be paid within 4 weeks. I mean how ridiculous”

Percentage Quoted: 4.3p in the £ (ie. 4.3% of total claim value) – Emails should be arriving by end of Friday 31st January 2020.

Petition for the government to fully compensate victims of Wonga gaining supporters on change.org: https://www.change.org/p/boris-johnson-for-the-government-to-fully-compensate-victims-of-wonga-ltd

What is the latest Wonga update for WDFC redress customers following its collapse?

Following the provision of an online claim page back in early 2019, the following has happened.

Wonga has been assessing the affordability complaints on a case-by-case basis. This is believed to be an automated service where loans are compared to the customer’s circumstances along with any hardship factors helping to determine if the Wonga payday loan was unaffordable.
Part of this process would then decide whether it was unaffordable and then calculate how much interest should be refunded to the customer.
The deadline for submitting this complaint was the end of September back in 2019

Following a successful claim, customers should be informed that they will eventually receive an email detailing the amount to be refunded.
The amount in terms of value that your refund will be based on a PERCENTAGE of the amount quoted in these emails.
Around 400,000 claims to Wonga on the grounds of unaffordable payday loans have been accepted.

On the 10th of January 202o, Wonga started emailing its customers detailing these percentages that would be paid to them.
There was also the attached guidance that the administrators expected payments to be made by the 30th of January 2020.
On the 27th January some customers reported having confirmation that a percentage of money owed from claims will be refunded by the end of the week.

Savvy Dad readers have reported that once past the extremely long phone queues, most have been advised that no further details are available – but there should be payments by the end of the week.

When will I get my claim redress payment and receive what I am owed from Wonga WDFC?

Wonga’s administration team has given the following information:

After your claim has been assessed, distributions are made in the following order:

The costs of realising assets will be paid first. Any amounts owing to secured creditors are then settled, followed by employee claims and unsecured claims (such as providers of goods and services and redress claims). If, after paying the costs and amounts due to the secured creditors, there are insufficient funds to pay all remaining claims in full then creditors will receive a proportion of their claim

What did the Wonga claim email and refund emails look like?

The latest emails to arrive from the Wonga administrators are simply laid out with a case number, third-party reference, and details of your bank account including the last four digits of customers’ bank account numbers. In particular, the most important part to note is that the email states:

you should be aware that the payment you receive will be considerably smaller than your accepted claim value.

One reader Natalie, very kindly sent us the content of the emails from Wonga administrators WDFC UK Ltd clarifying their intent:

“WDFC UK Limited – In Administration (the Company)

The Joint Administrators are now in a position to declare a first and final dividend of 4.3p in the £.

You will receive a payment of £20.20. Your payment represents 4.3p in the £ on your agreed claim value of £468.64.

Please note, if you are represented by a CMC/Third Party and have provided us with instructions that your CMC/Third Party representative should be paid on your behalf, the above amount will be paid to your CMC/Third Party representative directly.

As you will be aware from previous correspondence to you, the payment you will receive is significantly smaller than your Accepted Claim Value. This is because the total value of all accepted claims for customers/creditors significantly exceeds the money available to be shared out.

As per our previous assessment email, we have also taken steps to update your credit file in accordance with the outcome of your assessment. All credit file updates in association with this claim should be completed within approximately 45 days of this correspondence.

If you are being represented by a CMC/Third Party, a copy of this email has been sent to your CMC/Third Party representative.

When will I receive my final dividend payment?

As a result of the volume of dividend payments due to customers/creditors, you will receive your payment within four weeks of this email. Please note that if you have recently provided your bank detail updates to the Customer Care team, your payment may take longer to receive while your updates are processed.

The Wonga Customer Care team are no longer able to accept any bank detail updates. If you do not receive your payment within four weeks, please contact the Wonga Customer Care team using the details provided below.

For more information in relation to the dividend payment, please visit our FAQs.

If you have any urgent queries that are not answered by our FAQs, please contact the Wonga Customer Care Centre at customercare@wonga.com or on 020 7138 8330.

It is important to note that the Customer Care team will be experiencing higher than usual volumes of calls and emails. Therefore it may take them longer to respond.”

What is a Wonga claim payout?

This is the payment that customers should hopefully receive before the end of January 2020 in regard to their affordability complaint. The administrators gave the guidance that it should be before the 30th of January 2020. The payouts are in place because a payday loan is classed as “unaffordable” if repaying means that you had to get into more debt by borrowing more, getting behind on payments, or enduring additional hardships. Even if some customers have repaid their debts they may still have a valid claim for a refund of interest paid in such an unfair manner.

Wonga Update 10th February 2020 (See comments at end of the post for the latest views from others).

Percentage Expected: 4.3p in the £ (ie. 4.3% of total claim value) – Emails should be arriving by end of Friday 31st January 2020. This is similar to the expected 4.2p in the £ payout expected on the Moneyshop claim redress

It’s worth noting that the letters being sent out to people on the 10th of January state that your payment will be made but do not refer to the percentage you will be getting. To a certain degree, the amount is still unknown. To date, on the 11th of January 2020, I’ve seen no concrete indication of payment amounts of percentages confirmed other than speculation.

When is it likely that customers will see Wonga refunds in 2019 & 2020?

For applications made to the Wonga administration via the Wonga claims portal, payments should be made by the 30th of January 2020. This was the guidance laid out in the Wonga refund emails and the latest Wonga updates for payday loan affordability complaints.

NOTE: This post is now for information only for existing claimants as the deadline for making new claims to the administrators passed back in 2019.

What percentage are the Wonga payouts?

Wonga Update 10th February 2020 (See comments at end of the post for latest views from others).

Percentage Expected: 4.3p in the £ (ie. 4.3% of total claim value) – Emails should be arriving by end of Friday 31st January 2020.