Wonga to amend affordability criteria

Payday loan provider Wonga is preparing to implement a new set of affordability criteria for its customers following the firm's entering into a new voluntary requirement agreement with the Financial Conduct Authority (FCA).

Following an investigation by the regulator into relending rates by the company, the FCA revealed it felt Wonga has to date not been adequately taking steps to assess its customers against criteria to ensure they are able to afford to meet repayments in a sustainable manner and, as such, the two parties have now reached an agreement to remedy this situation.

Effective today (October 2nd), Wonga has introduced new interim lending criteria that will more effectively assess potential borrowers' likelihood of being able to afford repayments, which, in turn, the regulator believes will improve customer outcomes.

Furthermore, an agreement to provide remedial address to up to 330,000 existing customers that are presently more than 30 days in arrears on their borrowings and may have been subject to inadequate affordability scrutiny has been announced.

The move will see this group have the balance of their existing loans written off, meaning they will effectively owe the lender nothing.

Meanwhile, approximately 45,000 Wonga customers with loans that are between zero and 29 days in arrears will be asked to repay their debt without interest or charges, with the option to repay their borrowings over an extended period of four months.

The company is now in the process of contacting its customers to notify them if they are included in this redress agreement, with Wonga agreeing to do so by October 10th at the latest.

All of the firm's existing customers are advised by the FCA to continue to make repayments on their borrowings unless specifically contacted and told not to.

Responding to the announcement, FCA director of supervision Clive Adamson commented: "It is absolutely right that Wonga's new management team has acted quickly to put things right for their customers after these issues were raised by the FCA."

Posted by Joe White