Payday lender Wonga gets £ 10million lifeline

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Payday loan company Wonga received a much needed £ 10million infusion from Accel Partners and Balderton Capital, among others.

The funding will help cover compensation claims related to its past censored practices, according to TechCrunch.

Founded in the UK in 2006, Wonga had raised a total of around £ 145.5million from investors including Accel, Oak Investment, Meritech Capital and 83North, while a 2009 Series B included Accel, Balderton, Dawn Capital, HV Holtzbrinck Ventures and 83North.

But after admitting that his algorithmic technology loaned money to people who couldn’t repay it, Wonga agreed to cancel loans for 330,000 clients, as well as waive interest and fees for an additional 45,000. .

The company was also censored by the Financial Conduct Authority (FCA) for sending bogus letters from lawyers to overdue clients, forcing it to pay an additional £ 2.6million in compensation.

“Look, I think Wonga should have been pretty clear that they made a lot of mistakes on the business situation,” said Daniel Waterhouse of Balderton Capital. at the time. “They have a big loan portfolio, they said they were working closely with the FCA to bring a great product to market. They have been pretty clear on what has happened in the past and what they are doing now and where they are going.

Wonga continues to pay for his past conduct as an increasing number of individual compensation claims have been filed against the company.

“Wonga continues to progress against the transformation plan defined for the company. In recent months, however, the short-term credit industry has seen a marked increase in claims related to legacy loans, mainly due to the activity of claims management companies, ”said a spokesperson for the company.

“In line with this changing market environment, Wonga has seen a significant increase in claims related to loans taken out before the current management team joined the company in 2014. As a result, the team has raised £ 10million. new capital from existing shareholders, who remain fully in favor of management’s plans for the company. ”

Before this emergency cash injection, Wonga CEO Tara Kneafsey warned her institutional shareholders at the end of May that the company was at risk of becoming insolvent.

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