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Wonga to cut third of staff following new clampdown on payday …

Wonga is slashing about a third of its workforce to cut costs as it responds to a wider clampdown on unfair practices in the payday lending market.

The controversial lender said 325 jobs would go, mainly in the UK and Ireland. Wonga’s Dublin office will close as part of the plans, as will its office in Tel Aviv.

Related: Payday lending will shrink but only a complete ban will do

Andy Haste, the lender’s chairman, said: “Wonga can no longer sustain its high cost base, which must be significantly reduced to reflect our evolving business and market.

“Regrettably, this means we’ve had to take tough but necessary decisions about the size of our workforce. We appreciate how difficult this period will be for all of our colleagues and we’ll support them throughout the consultation process.”

Wonga’s decision to cut jobs came on the same day that the Competition and Markets Authority announced new rules to force payday lenders into being more transparent about their charges. The CMA is hoping that it will create more competition in the market, lowering costs for millions of consumers who rely on the loans.

Wonga employs a total of 950 people worldwide, but all the job losses relate to its UK payday loans business, which employs 650 people – about 280 in the UK, 175 in Ireland, 185 in South Africa and 10 in Israel.

It is understood about 100 jobs will go in the UK alone. All jobs will go in Ireland and Israel.

The group is aiming to achieve overall cost savings of at least £25m over the next two years, following a period of rapid expansion that saw costs treble between 2012 and 2014.

When Haste was appointed chairman last July, he said Wonga would become smaller and less profitable as it scaled back the number of customers it extended loans to, imposing stricter lending criteria.

In October the company was forced by the City watchdog, the Financial Conduct Authority, to write off £220m of loans to 375,000 borrowers, who it admitted should never have been given loans.

Wonga also announced on Tuesday that its former chairman Robin Klein was stepping down from the board after eight years.

The payday loans industry is undergoing a major shakeup as regulators seek to make the market fairer for cash-strapped consumers.

Under the new rules announced on Tuesday, lenders will have to list their deals on price-comparison websites and make it easier for customers to compare the total cost of different loans offered by various lenders.

Payday lenders will also have to provide customers with a summary of the total cost of their loans, as well as how additional fees such as late repayment affect the cost.

The recommendations were made after a 20-month inquiry into the payday loans industry by the CMA.

The watchdog concluded that a lack of price competition between lenders had driven costs higher for borrowers, with most people failing to shop around partly owing to a lack of clear information on charges.

Simon Polito, who ran the inquiry, said: “We expect that millions of customers will continue to rely on payday loans. Most customers take out several loans a year and the total cost of paying too much for payday loans can build up over time.”

The CMA’s decision follows an earlier clampdown by the UK financial regulator, the Financial Conduct Authority (FCA).

The authority introduced a price cap on 2 January to ensure that borrowers are never forced to repay more than double the amount of their original loan.

Interest and fees were capped at 0.8% a day, lowering the cost for most borrowers, while the total cost of a loan was limited to 100% of the original sum. Default fees were to be capped at £15 to protect people struggling to repay their debts.

Polito said: “The FCA’s price cap will reduce the overall level of prices and the scale of the price differentials but we want to ensure more competition so that the cap does not simply become the benchmark price set by lenders for payday loans.

“We think costs can be driven lower and want to ensure that customers are able to take advantage of price competition to further reduce the cost of their loans. Only price competition will incentivise lenders to reduce the cost borrowers pay for their loans.”

Joanna Elson, chief executive of the Money Advice Trust charity, welcomed the action from the CMA and FCA but added a note of caution: “This is good news for the consumer. More competition and transparency in the payday loan market will ensure that the FCA’s cap on the cost of credit remains precisely that– a cap, not the norm.

“This is a good example of regulators working together to bring about meaningful change in this sector. However, these improvements in the way that payday loans are regulated must not dilute the core message that payday lending remains an extremely expensive way to borrow,” she said.

Payday lenders will be forced to publish the details of their products on at least one price comparison website, authorised by the FCA. The CMA said on Tuesday it would work closely with the FCA to implement the new recommendations.

[…]

Payday loan caps come into force | Money | The Guardian

Well over a million people will see the cost of their borrowing fall now that new price caps on payday loans have taken effect.

However, early indications are that many of the sector’s bigger players will be charging the maximum amount allowed to under the new regime, rather taking the opportunity to set their fees below the cap.

Interest and fees on all high-cost short-term credit loans are now capped at 0.8% per day of the amount borrowed. If borrowers do not repay their loans on time, default charges must not exceed £15.

In addition, the total cost (fees, interest etc) is capped at 100% of the original sum, which means no borrower will ever pay back more than twice what they borrowed, said the Financial Conduct Authority (FCA), which has introduced the new rules.

Someone taking out a £100 loan for 30 days and paying it back on time will not pay more than £24 in fees and charges.

Payday lending is a multibillion-pound sector: the Competition & Markets Authority said there were 1.8 million payday loan customers in 2012-13, while the FCA estimates that in 2013, 1.6 million customers took out around 10m loans. However, some lenders quit the market before the changes took place. These include Minicredit, which ceased its lending on 10 December.

Consumer organisation Which? said the new regime “comes not a moment too soon”. Richard Lloyd, Which? executive director, said: “The regulator has clearly shown it is prepared to take tough action to stamp out unscrupulous practices, and they must keep the new price cap under close review.”

Which? carried out research into the amounts payday lenders were charging just before Christmas, to see if they had cut the cost of borrowing ahead of the price caps taking effect. It found that some of the bigger payday lenders had already brought their charges in line with the price caps. Wonga, QuickQuid, PaydayUK and MyJar were charging the maximum £24 to borrow £100 for 30 days, with default fees charged at £15.

When the Guardian checked some of the lender websites on 31 December, it found some had not yet updated their pricing. Peachy.co.uk’s website was quoting a cost of £135 for a £100 loan over 30 days, while Quid24.com showed a cost of £134.70 and Safeloans quoted £130.

Which? said London Mutual credit union was the only payday loan provider it looked at that charged less than the maximum allowed under the cap, with borrowers having to pay just £3 in interest on a loan of £100 over one month, with no default fees.

Martin Wheatley, chief executive of the FCA, said the new caps would make the cost of a loan cheaper for most consumers. “Anyone who gets into difficulty and is unable to pay back on time, will not see the interest and fees on their loan spiral out of control – no consumer will ever owe more than double the original loan amount,” he added.

However, it appears the new regime will not spell the end of the huge annualised interest rates quoted on payday loan websites. Despite the changes, Wonga is still able to charge a representative APR of 1,509%, while QuickQuid’s site was promoting an APR of 1,212%.

New rules covering payday loan brokers have also taken effect after the regulator was deluged with complaints over practices such as imposing charges that consumers often knew nothing about until they checked their bank account.

These firms cannot now request an individual’s bank details or take a payment from their account without their explicit consent first. Payday loan brokers will also have to include their legal name, not just their trading name, in all advertising and other communications with customers, and state prominently in their ads that they are a broker, not a lender.

[…]

Cost of payday loans to fall as price caps kick in | Money | The …

More than 1m users of short-term loans are expected to see the cost of their borrowing fall as a result of new price caps on payday lenders taking effect on Friday.

However, early indications are that many of the sector’s bigger players will be charging the maximum amount they are allowed under the new regime, rather than setting their fees well below the cap.

Interest and fees on all high-cost short-term credit loans are now capped at a daily rate of 0.8% of the amount borrowed. Meanwhile, if borrowers do not repay their loans on time, default charges must not exceed £15. In addition, the total cost including fees and interest is capped at 100% of the original sum. According to the Financial Conduct Authority, which has introduced the new rules, this means no borrower will ever pay back more than twice what they borrowed.

The price caps mean someone taking out a £100 loan for 30 days and paying it back on time will pay no more than £24 in fees and charges.

Stella Creasy, the Labour MP and prominent campaigner for payday loan reform, warned that the default charges encourage companies to continue pushing households into debt. “Little wonder despite intense scrutiny many of these firms can still make nearly three-quarters of a million pounds a week from British customers,” she said.

Payday lending is a multibillion-pound sector: the Competition and Markets Authority said there were 1.8 million payday loan customers in 2012-13, while the FCA has estimated that in 2013, 1.6 million customers took out around 10m loans. However, some lenders have quit the market ahead of the changes taking place; these include Minicredit, which ceased its lending activities on 10 December.

Consumer organisation Which? said the new regime “comes not a moment too soon”. Richard Lloyd, Which? executive director, said: “The regulator has clearly shown it’s prepared to take tough action to stamp out unscrupulous practices, and they must keep the new price cap under close review.”

Which? carried out research into the amounts that payday lenders were charging just before Christmas, to see if they had cut the cost of borrowing ahead of the price caps taking effect. It found that some of the bigger payday lenders had already brought their charges in line with the price caps. Wonga, QuickQuid, PaydayUK and MyJar were charging the maximum £24 to borrow £100 for 30 days, with default fees charged at £15.

Which? said London Mutual credit union was the only payday loan provider it looked at that charged less than the maximum allowed under the cap, with borrowers having to pay just £3 in interest on a loan of £100 over one month, and no default fees.

The payday loan industry trade body, the consumer finance association, warned that fewer people will get short-term loans and the number of lenders will fall. “We expect to see fewer people getting loans from fewer lenders and the loans on offer will evolve but will fully comply with the cap. The commercial reality is that the days of the single-payment loan are largely over – payday loans are being replaced by higher-value loans over extended periods.”

Martin Wheatley, chief executive of the FCA, said the new caps would make the cost of a loan cheaper for most consumers. “Anyone who gets into difficulty and is unable to pay back on time, will not see the interest and fees on their loan spiral out of control – no consumer will ever owe more than double the original loan amount,” he added.

However, it appears the new regime will not spell the end of the huge annualised interest rates quoted on payday loan websites. Despite the changes, Wonga is still able to charge a representative “APR” of 1,509%, while QuickQuid’s site was promoting an APR of 1,212%.

New rules covering payday loan brokers also take effect on Friday after the regulator was deluged with complaints over practices such as imposing charges that consumers often knew nothing about until they checked their bank account.

These firms cannot now request an individual’s bank details or take a payment from their account without their “explicit consent” first. Payday loan brokers will also have to include their legal name, not just their trading name, in all advertising and other communications with customers, and state prominently in their ads that they are a broker, not a lender.

[…]

New payday loan rules to cap fees, total cost and default charges …

The UK’s financial watchdog is clamping down on payday loans, with new rules to ensure that borrowers are never forced to repay more than double the amount of their original loan.

The Financial Conduct Authority (FCA) said interest and fees will be capped at 0.8% a day, lowering the cost for most borrowers, while the total cost of a loan will be limited to 100% of the original sum. Default fees will be capped at £15 in an effort to protect people struggling to repay their debts.

The changes, which will come into force on 2 January, mean that someone borrowing £100 for 30 days will not pay more than £24 in fees and charges if they repay the loan on time.

But the Labour MP Stella Creasy, who has led the campaign against doorstep lenders, slammed the FCA plans – unchanged from an original draft published in July – as an early Christmas present to the “legal loanshark” industry.

The FCA said it did not want to drive payday lenders out of business. The regulator estimates the lenders will lose 70,000 borrowers, 7% of the total market, as a result of the changes, as they restrict less profitable loans.

Martin Wheatley, the FCA chief executive, said: “I am confident that the new rules strike the right balance for firms and consumers. If the price cap was any lower, then we risk not having a viable market, any higher and there would not be adequate protection for borrowers. For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts. For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections.”

In the five months since the FCA took over regulation of consumer credit, the number of loans and the amount borrowed has dropped by 35%.

The chancellor, George Osborne, said: “We created a powerful new consumer regulator to regulate the payday lending industry and legislated to require the FCA to introduce a cap on the cost of payday loans. This is all part of our long-term economic plan to have a banking system that works for hard-working people and make sure some of the absolutely outrageous fees and unacceptable practices are dealt with.”

But critics accused the FCA of allowing “legal loan sharks” to slip through the net. “Today’s news will be welcomed as an early Christmas present for Britain’s legal loansharks,” said Creasy. “This cap is just £1 lower than their current charges. This is an industry where some firms are making nearly three quarters of a million pounds a week from British customers – such a high cap will do little to tackle these rip-off charges.

“We’ve warned regulators this cap needs to be much lower to really change the behaviour of these companies, but today’s announcement shows they are still not listening. Other countries are much stronger at taking on these companies.”

She said borrowers in Japan, Australia, Canada and parts of the US have better protection than UK consumers.

Debt charities gave the plans a cautious welcome, but urged the regulator to ensure that lenders did not simply change their business model to flout the rules.

Joanna Elson, chief executive of the Money Advice Trust, which runs National Debtline, said: “We hope that these measures will bring an end to the inappropriate lending that we have seen from this industry. However, the FCA will need to be vigilant to ensure that lenders do not simply change their business models to try to evade the rules.”

She added that even under the new rules, many people will still end up repaying very high amounts when they would be better off with free debt advice from charities.

The Consumer Finance Association (CFA), which represents some of the best-known payday lenders, has said the plans will drive some firms out of business. It estimates that only four players will remain in the market: three online lenders and one high street chain. “We will inevitably see fewer people getting fewer loans from fewer lenders,” said Russell Hamblin-Boone, chief executive of the CFA.

Wheatley said payday lenders could disappear from the UK high street within a year, although the FCA’s modelling suggested it was more likely that a few players would remain. Speaking on BBC Radio 4’s Today programme, he said: “We don’t want to close the industry, we want to change it so that it operates in a way that delivers good outcomes.”

He dismissed industry claims that thousands of people would lose out as a result of tighter access to credit, saying there were “a lot of myths in this space”.

According to FCA modelling, a majority of the 70,000 people who will no longer have access to payday loans will make do without getting a loan; others would borrow from family or an employer and only 2% would go to a loan shark.

The biggest online payday lender, Wonga, said it “looks forward to launching a cap-compliant product”.

[…]

UK regulators cap payday loan interest | Business | DW.DE | 11.11 …

Interest charged on loans offered by payday lenders in Britain would be capped at 0.8 percent per day from January of next year, the country’s Financial Conduct Authority (FCA) announced Tuesday.

The decision was made after months of consultations and stark critcism by consumer protection groups of exorbitant interest rates often causing misery among borrowers.

The authority also stipulated that borrowers must never have to pay back more in fees and interest than the amount granted to them, meaning a total cost cap of 100 percent.

No more spiraling payday debts

“I am confident that the new rules strike the right balance for firms and consumers. If the price cap was any lower, then we risk not having a viable market. Any higher and there would not be adequate protection for borrowers,” FCA Chief Executive Martin Wheatley said.

The FCA added default fees would be capped at 15 pounds ($24, 19 euros).

“For people who struggle to repay, we believe the new rules will put an end to spiraling payday debts,” Wheatley argued. “For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections.”

The FCA had first published its proposals for a payday loan price cap in July. The price cap structure and levels remained unchanged following the consultation process.

[…]

Payday loan charges cap announced

Thumbnail

BBC News – Payday loan charges cap announced by FCA

FCA’s Martin Wheatley: It “may be the case” there will be no High Street payday lenders in a year’s time

“For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections,” he added.

The price cap plan – which includes both interest and fees – remains unchanged from proposals the regulator published in July.

‘Tighter checks’

The confirmed measures will see:

Initial cap of 0.8% a day in interest charges. Someone who takes out a loan of £100 over 30 days, and pays back on time, will therefore pay no more than £24 in interest A cap of £15 on the one-off default fee. Borrowers who fail to pay back on time can be charged a maximum of £15, plus a maximum of 0.8% a day in interest and fees Total cost cap of 100%. If a borrower defaults, the interest on the debt will build up, but he or she will never have to pay back more than twice the amount they borrowed

Russell Hamblin-Boone, chief executive of the Consumer Finance Association, said the payday loans industry had already put in place higher standards of conduct.

“We’ve restricted, for example, extending loans, rolling over loans, [and] we’ve got tighter checks on people before we approve loans,” he told BBC Radio Four’s Today programme.

“This [cap], if you like, is the cherry on a rather heavily-iced cake,” he said.

The £2.8bn industry was expected to shrink as a consequence of the cap, which could make people vulnerable to loan sharks, he added.

“We’ll inevitably see fewer people getting fewer loans from fewer lenders,” Mr Hamblin-Boone said. “The fact is, the demand is not going to go away. What we need to do is make sure we have an alternative, and that we’re catching people, and that they’re not going to illegal lenders.”

Zoe Conway, Reporter, BBC Radio 4 Today: The view from Byker, Newcastle

In the High Street in Byker, there are pawn shops, and brightly coloured Money Shops and Cash Converters. It does not take long to meet someone struggling with debt.

Kevin, behind on a loan from a doorstep lender, says people have very few options. “I’ve actually been approached in the street,” he says. “It was one of those ‘legs broke if you don’t pay’ sort of things.”

There is concern in this community that if it gets harder for people to access payday loans, the loan sharks will take over. That is certainly the view at the Byker Moneywise Credit Union. They offer payday loans at much lower rates but few people locally know about them and, admits manager Christine Callaghan, the Union is not big enough to meet the demand for short-term loans.

At The Big Grill, the owner, John, is making bacon sandwiches. He is worried that people may have to resort to stealing to make ends meet. “They’ll turn to crime to get what they want especially for their kids,” he says.

It is a view shared by resident Alison who thinks the government needs to step in to give people more options and better places to turn to.

Responsible lending

Mr Wheatley, of the FCA, said that the regulator’s research had shown that 70,000 people who were able to secure a payday loan now would not be able to do so under the new, stricter rules. They represent about 7% of current borrowers.

However, he disputed the industry’s view that many of these people would be driven into the arms of illegal loan sharks. He said most would do without getting a loan, some would turn to their families or employers for help, and only 2% would go to loan sharks.

He added that he wanted to see a responsible, mature industry for short-term loans.

Gillian Guy, chief executive of Citizens Advice, said: “People who are in a position to borrow need a responsible short-term credit market. A vital part of this is greater choice. High Street banks should seize the opportunity to meet demand and offer their customers a better alternative to payday loans.

“The FCA should monitor the cap, including whether it is set at the right level, to make sure it is working for consumers. They must also keep a close eye on whether lenders are sticking to the rules.”

Earlier this year, the government legislated to require the FCA to introduce a cap on the cost of payday loans. Chancellor George Osborne said the decision would “make sure some of the absolutely outrageous fees and unacceptable practices are dealt with”.

Meanwhile, Cathy Jamieson, Labour’s shadow financial secretary to the Treasury, said she was glad that action was being taken.

“However, we believe these changes will need to be regularly monitored to ensure they are effective. That is why we want to see a review by the end of 2015 – much earlier than is currently being recommended by the FCA,” she said.

More on This Story

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Farewell payday lenders, welcome loan sharks? 09 OCTOBER 2014, BUSINESS Payday loan hardship cases ‘up 42%’ 02 SEPTEMBER 2014, BUSINESS Thousands refunded for payday loans 14 JULY 2014, BUSINESS Church of England cuts Wonga ties 11 JULY 2014, BUSINESS

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[…]

Payday lenders may vanish within year as result of price cap, says …

Price caps on payday loans to be revealed by the regulator on Tuesday could see the controversial lenders disappear from the high street within a year, according to one expert who has worked on the policy with the watchdog.

In July, the Financial Conduct Authority said it was planning to limit interest on short term loans to 0.8% a day and cap the total fees and charges at 100% of the initial loan, starting from January.

In its original assessment, the regulator said that its modelling suggested such a cap would mean that only one high street firm and three online lenders could continue to operate at a profit without changing their business model.

But Dr John Gathergood, an associate professor in economics at the University of Nottingham who has worked with the FCA on the cap, said the assessment was now bleaker for the high street lenders. It may well be the case that there are no high street payday lenders operating in the UK next year as a result of the price cap policy.

He said: “The FCA needs to strike a balance: lowering the price benefits consumers, but lowering the price too much will cause firms to exit the market as it will be unprofitable to lend. This is especially the case for high street lenders who have higher overhead costs.”

The move to consider a price cap that is estimated could save consumers around £193 year came after a U-turn by the government and was put out to a consultation that ended earlier this month.

If the FCA confirms a cap below 1%, it could reverse the recent boom in high street loan shops as hundreds of branches of lenders such as the Money Shop and Cash Converters have sprung up around the UK.

During the consultation, debt charities told the FCA they believed even the charges capped at 100% would still harm customers and urged the regulator to consider a lower overall limit, particularly on higher loans.

One charity, StepChange, also called for lower default fees for consumers who got into difficulties with their loans. In its submission to the regulator it said it was concerned that while the FCA had found that 50% of payday borrowers had experienced financial detriment, just 11% of people would be prevented from getting a loan as a result of its proposals. “That means that more than four in 10 [payday] borrowers in the price-capped market would remain at risk of real financial detriment as a result of taking out a loan. This is considerably short of the level of consumer protection that we believe is necessary.”

Lenders have suggested the proposed cap could force consumers into the arms of illegal money lenders, including online firms operating from outside the UK. Firms have already been forced to introduce new affordability checks and make changes to how they collect loans, and this has resulted in some borrowers being turned away.

Russell Hamblin-Boone, chief executive of the Consumer Finance Association, which represents some of the best known payday lenders: said: “It’s too early to speculate on the detail but we do know that a cap on the cost of credit will mean many people will struggle to manage who previously borrowed and paid back small sums over short periods.”

He said that demand for credit was unlikely to change even if availability fell. “We know that only a quarter of those turned down for loans since lenders tightened their borrowing decisions said that they were better off not getting the money; the rest racked up charges for missed payments,” he said.

[…]

Four in ten borrowers get a payday loan even if one lender rejects them

Four percent of these people admitted to taking money from an unlicensed lender after they were rejected, and 2pc went into debt with a credit union. More than three-quarters did not know whether their lender was licenced, and 33pc said they had considered borrowing from an unlicensed lender after they were rejected by the major payday loans firms.

“The more rigorous affordability checks mean they are turning down people [who] still want a short-term loan,” said Russell Hamblin-Boone, chief executive of the CFA. “The worry is, are the other payday lenders being as rigorous as the most compliant members or are they new lenders that are under the regulators’ radar at the moment?”

The FCA took over regulating consumer credit in April, bringing about 500 payday lenders under its remit. The watchdog found in its own survey of 2,000 customers that 60pc said they would not borrow money if they were denied access to payday loans, while up to 30pc said they would ask family and friends for help.

The regulator plans to introduce a price cap of 0.8pc per day on short-term loans and an overall ceiling on charges set at 100pc of the loan value from next year in an attempt to curb the proliferation of lenders that offer debts with excessive interest rates and punitive charges. Firms must also apply for FCA permission to offer consumer credit.

A competition investigation by the Competition and Markets Authority in June found that the average customer takes out six payday loans a year.

“If a consumer has one loan application declined, it does not necessarily mean an application won’t be approved by another lender elsewhere,” said an FCA spokesperson. “Not all lenders offer loans for the same amounts, rates or durations. A decision to lend will vary between lenders based on how they assess credit risk, their appetite for risk and the amount of capital available to lend.

“The FCA also expects all lenders to carry out appropriate affordability checks to ensure that people can afford to pay back what they borrow.”

The FCA and CFA polls both found that users of short-term loans often have mixed feelings about borrowing in this way. The FCA found that 41pc of first-time borrowers regretted taking out the loan, while 44pc of the CFA respondents said they would feel better off if they no longer had access to short-term debt.

Loans company Wonga announced earlier this month that it was writing down £220m-worth of customer debt after reviewing its affordability checks.

[…]

Wonga dithers over writing off improperly granted loans | Business …

Wonga customers are anxiously waiting to find out whether they are among the 330,000 borrowers having their payday loans written off.

The UK’s best-known payday lender has been forced to refund borrowers after the City regulator discovered it had lent money without making sure borrowers were able to make repayments.

Those who should never have been given loans and have fallen more than 30 days behind with repayments will have their debts wiped entirely, while a further 45,000 who are up to 30 days in arrears will have their interest and charges waived.

Wonga has been the subject of growing controversy for making loans of up to £1,000 in a matter of seconds, often to borrowers who ended up taking out further loans to pay off their debts.

Although it claimed that an algorithm checked between 6,000 to 8,000 “data points” for each online application and was a better indication of borrowers’ ability to repay a loan than traditional credit scoring checks, information it supplied to the Financial Conduct Authority (FCA) confirmed claims by debt charities and campaigners that Wonga was not properly ensuring that customers could afford to meet their commitments.

The FCA gave the firm, which quotes an annual interest rate of 5,853%, until the end of Friday to contact those affected by the inadequate affordability checks and Wonga said it would do so by email.

Although all week Wonga’s website told customers it would be in touch “by 10 October”, it was late Friday afternoon before the message was updated to say that emails had finally been sent out.

Borrowers who have used the company since its launch in 2007 had been in limbo since the news of the write-offs broke last week. One Wonga customer said he did not know whether he should pay an instalment of a repayment plan he had entered with the firm or risk accruing more charges if he was judged not to qualify for a write-off.

Wonga said on Friday it had contacted the 375,000 affected customers to let them know what they needed to do next. It urged customers it had contacted not to involve a third party with their case.

The email from Wonga to the customers affected explained that the company “will automatically clear any outstanding debt you have with us” by the end of October. “You do not need to do anything.”

It added: “We recognise that we may not have always made the right lending decisions and for this we apologise. We intend to be sure in the future that we only lend to customers who can reasonably afford to repay their loans.”

As well as writing off loans at a cost of £220m, Wonga has been forced to scrap its affordability checks and is working on new lending criteria scrutinised by the FCA.

Customers caught up in the action have been assured that details of their loans will be removed from their credit files. The fact that they applied to borrow will still show up.

Wonga has also agreed to contact the remainder of its 1 million customers, informing those who are not affected that this is the case. The regulator said there was no timeframe for this, but it expected notices to be given as quickly as possible.

Discussions between the firm and FCA are continuing, and many borrowers are hoping that redress will be extended to those who were able to keep up with repayments, even though they should not have been offered a loan.

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Payday loans shaken up by competition regulator | Business | The …

Payday lenders will be forced to give details of their products on price comparison websites to help potential borrowers shop around under new competition rules for the sector.

The Competition and Markets Authority (CMA) said payday lenders’ customers find it hard to get clear information on the cost of borrowing. Letting them compare deals online will increase competition and make it easier for new lenders to offer better prices, the CMA said.

The regulator will also require payday lenders to be clearer about their fees and charges, make it easier for borrowers to shop around without hurting their credit record, improve data sharing between lenders and oblige them to give borrowers a summary of charges.

The proposals follow a price cap announced in July by the Financial Conduct Authority (FCA) that limits repayments to no more than double the sum borrowed. The CMA said it wanted to make sure the cap did not stifle competition by setting a going rate for all lenders.

The FCA estimated that payday lenders issued 10m loans worth £2.5bn last year. The sector grew rapidly during the recession, but politicians and campaigners have attacked lenders for preying on vulnerable customers and charging high interest rates that risk their borrowing getting out of control.

Wonga, the biggest online payday lender, was ordered last week to write off £220m of loans to 375,000 people that it admitted should never have been granted. The advertising watchdog has also banned Wonga from using an advert that fails to mention its 5,853% annual interest rate.

Simon Polito, the chair of the CMA’s payday lending investigation group, said: “Greater price competition will make a real difference to the 1.8 million payday customers in the UK. At the moment there is little transparency on the cost of loans and partly as a result, borrowers don’t generally shop around and competition on price is weak.

“Lower prices from greater competition would be particularly welcome in this market. If you need to take out a payday loan because money is tight, you certainly don’t want to pay more than is necessary. Given that most customers take out several loans in a year, the total cost of paying too much for payday loans can build up over time.”

The CMA also recommended that lead generator websites selling potential borrowers’ details to lenders should be clearer about their activities. Many borrowers think the sites are lenders rather than middle-men and do not understand that they sell customers’ details to lenders for fees.

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