Written by: Keith Tully
Reviewed: Friday 24th August, 2018
The payday lending firm Wonga has stopped offering new loans to potential customers as the prospect of administration draws closer for the company.
It has been widely reported that Wonga entered a period of financial crisis in recent days, with arrangements having already been made with professional service providers who could soon be appointed as administrators.
Despite clearly being in a very unstable financial position, Wonga has yet to completely collapse or head into administration, with reports suggesting that the company’s management teams have been seeking ways to avoid insolvency.
However, the decision to stop offering new loans to customers is being interpreted by observers as a sign that perhaps those efforts will soon prove to have been in vain.
Statements issued on behalf of Wonga said: “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.”
Having been founded in 2006, Wonga rose to prominence to become one the best known short-term or payday lending companies in the UK.
In recent years, the Financial Conduct Authority has clamped down on the activities of payday lenders like Wonga and limited the amount of interest they can charge their customers.
The company is also understood to have been impacted badly by the receipt of a considerable number of compensation claims being brought against it by claims management companies.
Like many of its competitors, Wonga has been a controversial operator in the financial services sector with critics suggesting that it has been guilty of exploiting vulnerable borrowers by giving them loans they could not afford and charging them extremely high rates of interest.
Around 500 jobs could be at risk if Wonga were to enter administration in the coming days or weeks.
According to reports, Wonga was given a £10 million cash injection by its owners earlier in August but that backing has seemingly not been enough to offset the financial issues currently being faced by the business as it teeters on the brink of administration.
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