Cash-strapped Wonga has stopped accepting new loans

UK payday loans firm Wonga, whose investors include high profile European VC firms Accel and Balderton, appears to be teetering on the brink of collapse as it’s stopped taking new loans. A spokeswoman for the company confirmed to TechCrunch it is not accepting new loan applications. She sent us the below statement which has been […]

UK payday loans firm Wonga, whose investors include high profile European VC firms Accel and Balderton, appears to be teetering on the brink of collapse as it’s stopped taking new loans.

A spokeswoman for the company confirmed to TechCrunch it is not accepting new loan applications.

She sent us the below statement which has been posted on Wonga’s mobile website (although it was not visible to us on the desktop site at the time of writing — and it was still possible to attempt to apply for a loan there, though the page subsequently returned a broken link).

Wonga’s statement reads:  “While it continues to assess its options Wonga has decided to stop taking loan applications. If you are an existing customer you can continue to use our services to manage your loan. Click here for more information.

The spokeswoman declined to comment further on the status of the company but speculation is rising that Wonga is about to fold.

The Guardian reports the company held emergency talks with the UK’s Financial Conduct Authority on Wednesday over the impact of its collapse on existing customers.

While the BBC reports that the firm has arranged for Grant Thornton to act as administrators.

Wonga has been in trouble for some years, after regulators clamped down on the payday loans sector.

In 2014 the company agreed with the financial regulator to a £220M write down having lent money to people without properly assessing their ability to pay it back.

It was further censured for sending fake lawyers’ letters to customers in arrears — and had to pay out a further £2.6M in compensation for that.

Wonga has since made an attempt to reinvent itself — with a focus on flexible loan products — but the costs associated with its legacy behavior kept rising.

And earlier this month it emerged that Wonga’s investors had injected $10M into the business to fund rising numbers of compensation claims related to its past conduct.

In recent times the company has also been selling off assets — passing off its German payments business, BillPay, to Klarna last year, for around £60M.

Prior to this month’s $10M investor injection, the 2006 founded firm had raised around £145.5M in VC — from a string of VCs including Accel, Balderton, Oak Investment, Meritech Capital, 83North, Dawn Capital and HV Holtzbrinck Ventures.

It looks very unlikely any of them will be getting their money back.