Wonga: Payday loans firm on the brink of going bust, but what are its links to the Tories?

Wonga: Payday loans firm on the brink of going bust, but what are its links to the Tories?

David and Samantha Cameron at the 2012 Conservative Party conference, where Wonga representatives reportedly met with ministers. Image: Getty

Monday, August 27, 2018

Wonga has lined up administrators after a surge in compensation claims pushed the payday lender to the brink of collapse, according to reports.

The firm has said it is "considering all options" just weeks after shareholders pumped £10 million in a bid to save it from going bust.

According to Sky News, Wonga has earmarked financial services firm Grant Thornton to act as administrator in case the lender's board decides it cannot avoid insolvency.

Earlier this month, Wonga said its struggles were due to a "significant" increase industry-wide in people making claims in relation to historic loans.

The lender blamed claims management companies for the rise, but said it was making progress against a transformation plan set out for the business.

On Sunday, Wonga said the number of complaints related to UK loans taken out before 2014 had "accelerated further".

Wonga has faced a barrage of criticism over the high interest it charges on its loans, and has been accused of targeting those who are vulnerable.

In 2014 it cut its interest rate from 5,853% to 1,509% APR after the Financial Conduct Authority imposed new rules.

The same year the firm introduced a new management team and wrote off £220 million-worth of debt belonging to 330,000 customers after admitting making loans to people who could not afford to repay them.

In the same year, the Financial Conduct Authority said it would bring in stricter affordability checks to the industry and introduce a 0.8% cap on the cost of payday loans on the amount borrowed per day.

 

Links to the Tories

In 2012, Wonga confirmed it had sent delegates to the Tory party conference to hold meetings with ministers.

A Cabinet source claimed to the Telegraph at the time that the representatives were charged up to £1,250 to meet with politicians including Sajid Javid, who was then economic secretary to the Treasury, David Gauke, then-Treasury’s exchequer secretary and now Justice Secretary, and Michael Fallon, former Defence Secretary, who was a business minister at the time.

The following year Javid spoke at a news conference about regulating the payday loans industry (pictured above).

 

Donations from Wonga investor

The payday lender has also faced criticism over its links with the Conservative Party.

In 2013, venture capitalist Adrian Beecroft - who had a major stake in Wonga - was found to have donated around £800,000 to the Conservatives for the seven years prior to that.

He also donated to the 2017 general election campaign.

In 2012, Beecroft wrote the Beecroft Report for David Cameron, which recommended scrapping unfair dismissal legislation to make it easier to sack employees. It was widely criticised by the Lib Dems.

 

Justin Tomlinson

Justin Tomlinson enjoys a chicken wing at a food festival in Swindon. Image: Justin Tomlinson/Twitter

In 2016, MP for Swindon Justin Tomlinson was suspended from Commons for two days for leaking details of a report on consumer credit to Wonga.

An investigation by the Commons public accounts committee found that in 2013, Tomlinson used a personal email address to send a draft of the report to a Wonga employee.

Tomlinson had previously helped Wonga take out a £30,000 sponsorship of his local football club.

He apologised at the time.

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