Pay-day timebomb: One million Wonga loans not repaid on time as lender calls in debt collectors

Almost one million loans made by Wonga have not been repaid on time because customers were unable to meet their repayments.
A spokesman for the payday loan firm said it was considering trying partly to recoup its losses by selling bad debts to third parties.
The revelation came during a grilling of the company in front of the Public Accounts Committee on the effectiveness of consumer credit regulation.

Anger: MPs are concerned about the spiralling number of people who are unable to to repay their loans plus the interest at much-criticised rates of about 4,200 per cent

MPs said the debt sell-off raised concerns about the spiralling number of people who could not afford to repay the money they had borrowed plus the interest at much-criticised rates of about 4,200 per cent.
They also said they were worried about how debtors would be treated when the problem was put into the hands of third-party debt- collection agencies.
The most recently available information suggests that Wonga wrote off £77 million as bad debt in 2011, MPs said. They estimated that was the equivalent to about 300,000 loans in one year.

The average amount borrowed by customers of Wonga – Britain’s biggest payday loan provider – is £257.
‘Bluntly, given the size of or our balance sheet, we have to look at alternatives [when customers fail to pay],’ Henry Raine, Wonga director of legal affairs, told MPs.
Representatives from short-term lenders Provident Financial and Fair Finance also appeared before the committee.
Margaret Hodge MP said she was concerned about the access that companies like Wonga had to bank account details and was also worried about fraud.
She pointed out that many people had been taking out payday loans after fraudulently giving details of the bank accounts of third parties who then find themselves making the loan repayments.
Raine admitted that the online industry had a ‘significant problem’ with fraud and identity theft.
The company has told a panel of MPs that an average 15 per cent of its loans are not paid back on time and it has to date made six million loans.
Wonga was founded by South African Errol Damelin and his business partner Jonty Hurwitz. The most recently announced figures showed that the company’s profits had tripled to £46 million in 2011.
The payday loans industry has grown massively since the recession began as consumers have found it increasingly difficult to borrow from mainstream lenders.
Campaigners have raised alarms over the number of people taking out payday loans, particularly over Christmas to deal with festive bills.
Financial Mail has complained to the Office of Fair Trading about the behaviour of more than 80 payday loan firms. Several others have been reported to the Advertising Standards Authority for possible breaches of regulations.
Citizens Advice said the number of people contacting them with problems relating to payday loans doubled last year. It has launched a national survey to measure the problem and to test the strength of the payday lenders’ self-regulating ‘good practice’ charter.