330,000 people will have their debts wiped with Wonga, after the payday lender announced the introduction of new affordability checks.
Wonga have agreed to wipe £220m worth of debts as a result of lengthy discussions with the Financial Conduct Authority (FCA).
The wipe will cost Wonga an estimated £35 million.
On top of the customers who will have their debts wiped, a further 45,000 will be told that they needn’t pay interest on their loans.
Andy Haste, who joined Wonga as chairman in July, has conducted a review of lending practices.
He said that there was a “real and urgent” need for stricter lending criteria, and that this would mean “accepting far fewer applications from new and existing customers.”
Mr. Haste told the BBC:
“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.
“I agreed with the concerns expressed by the FCA and as a consequence of our discussions we have committed to taking these actions.”
Payday loans have become increasingly popular during the recession, prompting greater interest from regulators.
Clive Adamson, director of supervision at the FCA, told The Telegraph:
“We are determined to drive up standards in the consumer credit market and it is disappointing that some firms still have a way to go to meet our expectations. This should put the rest of the industry on notice – they need to lend affordably and responsibly.”
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