Do I Need to Pay Wonga? Everything You Need To Know!
If you’re one of the millions of people who have suffered because of payday loans, you might have been pleased to see the news that payday lender Wonga was going into administration.
Not long ago, Wonga was the UK’s biggest and fastest growing payday lender – but the company’s luck changed when the Financial Conduct Authority (FCA) imposed strict new rules around the amount of interest payday lenders could charge their customers.
What’s more, the FCA forced Wonga to compensate customers for unfair lending and debt collection practices. The combination of these two things proved to be too much financial strain for the company – and a few days ago, they went into administration.
The question is – what does this mean if you owe Wonga money?
A time for celebration?
While Wonga running into financial issues is certainly a strong message to the companies who make a profit from people who are facing financial hardship, we’re sorry to tell you that if you’ve borrowed from Wonga, you’ll still need to pay it back.
Although it’s likely to be start of the process; Wonga hasn’t yet shut down or closed – it’s gone into ‘administration’ – which means control of the company is passed to insolvency practitioners; financial and legal experts who will try to ensure the company repays all of its debts.
The administration team must make sure they don’t cause the business to take on anymore debt – which is why Wonga have stopped lending money. However, they must also make sure they try to collect as much of the money that Wonga is owed; meaning customers will need to keep repaying.
Will anything change?
Administrators taking control of Wonga have done so with the aim of recovering as much money as possible for the company. Now, if they could magically recover all of the money at once, they would – but since you’ve signed a credit agreement, that protects you from anyone changing the rate at which you’ll repay your loan.
So, Wonga won’t suddenly ask for everything you owe back – but they will expect you to keep repaying what you owe, at the rate you agreed. They’ll also likely to be able to agree adjusted repayment terms if you are struggling – but they won’t be able to offer more loans to ‘roll over’ your debt.
For now, you’ll still speak to Wonga staff when you call – and you’re still legally tied to the agreement you made with Wonga.
What happens if you just stop paying?
Hearing that Wonga are in financial trouble is certain to make people think about simply not repaying any of the money they owe the company – but that could cause you some serious financial problems.
The credit agreement you signed is still legally binding – and the administration process is often very long, so even if Wonga is destined to close, the administrators will make sure the company continues to chase its debts for a long time. They may even pass or sell unpaid debts to another debt recover company – and that recovery company will continue to chase their debts for years to come.
Although it’s disappointing that your debt won’t just disappear, it’s important to keep paying what you owe. Unfortunately, the part of Wonga that will continue to operate without any change is their recovery department, and they’ll continue to pass debt to recovery companies – and even to the courts and bailiffs.
Stopping your repayments could quickly lead to big problems for your credit rating – and, if non-repayment continues, it could mean you have court representatives knocking on your door, with a view toward collecting your debt in full, or repossessing goods to offset what you owe.
What happens about compensation?
As we mentioned earlier, part of the problem Wonga has run into is the huge amount of compensation they’ve had to pay back to customers for mis-selling or mismanaging their loans.
Now, what will happen to current compensation claims remains to be seen – but for the time being, if you’ve had a payday loan, it’s worth checking our guide to payday loan refunds and seeing if you’re entitled to a part or full refund of your borrowing fees. If you think you are, you should still make a claim, although whether or not Wonga will have the means to repay what they owe will depend on how the administration process plays out.
Wonga isn’t the first payday lender who has gone into administration. In 2015, ‘Cash Genie’ were forced to go down a similar route to Wonga – and their administrators appealed to over 92,000 former customers to come forward if they felt like they had been unfairly treated.
This example is good news for Wonga customers – after all, it’s the administrator’s job to make sure debts are repaid, so, if you’re due compensation, you deserve a place on that long list of people Wonga owe money to.
Beware of other payday lenders
While we wish we could tell you that your Wonga debt will disappear, or that you can just stop repayments – we can’t. If you owe money to Wonga, you must still make your planned repayments – otherwise you’ll find yourself in the same financial trouble as you would have done before the company ran into problems.
In fact, now is a time to be double-careful with your money. If there’s one thing we know, it’s that many payday lenders will take advantage of people who are struggling with their money – and that means you may be asked by other lenders if you want to roll your Wonga loans into more high-priced payday loans that they provide.
Whether you owe Wonga, or any other company – if you’re struggling with debt and feel like payday loans are the answer, talk to one of our debt advisors before you take any action. For many people, payday loans are a dangerous slippery slope that leads to long lasting money problems – and we can often point you in the direction of far better and more-affordable alternatives.