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We weren't expecting this:
To put this in context, 330,000 people is about the same as the population of Leicester. That's a fair few people having their loans written off by this well-known pay-day lender.
The FT is reporting that this amounts to a write off of £220 million:
Wonga itself has announced that it is now making 'significant changes' to its business model:
The lender confirms that it will be writing to 'all of the customers impacted as soon as possible'. Customers have been asked not to contact the lender, or indeed any claims management companies. A programme will be launched by Wonga on 10 October to deal with these claims.
Wonga chairman Andy Haste stated today,
It’s clear to me that the need for change at Wonga is real and urgent. Our regulator is determined to improve standards in consumer credit and I share that determination. There is much to do in order to make Wonga a sustainable and accepted business, and today’s announcement is a significant step forward in that process
It is clear that the Financial Conduct Authority (FCA) is keen to see its muscles being flexed:
Whether or not it has the resources to do so (with 55,000 new firms being subject to regulation by the FCA since 1 April 2014) is still open to question.
However the fact remains that from that date, businesses carrying on a consumer credit-related activity have been obliged to comply with the FCA Consumer Credit Sourcebook (CONC).
Chapter 5 of CONC contains detailed rules and guidance on responsible lending requirements, including the requirement to conduct a creditworthiness assessment before entering into an agreement.
The scope and extent of the creditworthiness assessment and the assessment required by CONC is extensive.
Things to consider when doing the assessment typically include:
That's a lot of things to think about.
What's more the payday lending sector is also being investigated by the Competition and Markets Authority’s which is due to publish its final report on this market in December or January.
And if that wasn't enough, a cap on the total amount that high-cost short-term credit lenders can charge will be implemented in January 2015. The FCA states that it is due to publish its final rules in early November 2014 to give firms time to prepare for the change.
If you lend money in this market (or indeed are a customer who wants to know what he or she should expect from a lender) then you'd do well to keep an eye on the FCA website.
And, of course, this blog.
In the meantime, if you have any thoughts, we'd love to hear from you below.
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