Controversial payday lender Wonga have announced they will write off £220m in customer debts after they implemented new, long demanded affordability checks.
Payday loan companies have been criticised for their approach to praying on vulnerable consumers who are unable to get credit through banks and charging high interest.
A lot of people who have taken out payday loans often aren’t aware of the full cost due complicated sales jargon and find themselves unable to repay the credit.
Wonga have decided they will introduced new checks which will assess whether or not someone can afford to repay the loan within the agreed period of time.
Some 330,000 current customers who would not have been applicable for the loan under the new checks will have their debt written off. Another 45,000 customers will not have to repay any interest on their loan.
Wonga are expected to contact customers who are affected by 10th October and explain whether they will have their debt written off or won’t have to pay interest charges.
Wonga chairman Andy Haste said,
“We want to ensure we only lend to those who can reasonably afford the loan in question and during my review, it became clear to me that this has unfortunately not always been the case.”
The changes should mean less people will be granted a payday loan who are unable to make the agreed repayment and therefore reduce consumer debts.
Other payday lenders have been under pressure by the Financial Conduct Authority (FCA) to make similar changes so Wonga may just be the first of many.
Stuart Carmichael, trustee of debt advice charity Debt Support Trust said,
“At Debt Support Trust we deal with a lot of people everyday who have fallen into the payday loan trap and it can be extremely difficult to resolve.
The changes Wonga have began making are certainly a move in the right direction but we will be monitoring closely whether or not other lenders follow suit.”