By Mark Baber
October 2 – News that payday lender and Newcastle United sponsor Wonga will be writing off £220 million of debt owed by 330,000 customers gives additional credibility to recent speculation the company is reconsidering its 4-year sponsorship of the Premier League club in light of falling profits and increasing regulation in its home market.
Wonga’s new chairman Andy Haste has now admitted the company has been lending to people who can’t “reasonably afford the loan in question.”
Having finally admitted this is the case, 330,000 customers have today had their loans written off, justifying the campaign by Newcastle United supporters, the Church of England, local and national politicians against the Newcastle United board for advertising a company accused of preying the club’s supporters and damaging the local community.
In addition to those who will have debts written off, 45,000 customers will be asked to repay their debt without interest and charges. These latest moves come on top of previous commitments to try and track down previous customers who were overcharged for loans or who were sent fake threatening legal letters by fake companies set up by Wonga.
Even before today’s revelations, the company had admitted it expected to be “smaller and less profitable” in the future with recent figures showing a 53% drop in profits over the previous financial year.
Wonga has been particularly hard hit by regulative efforts to reduce interest rates (which had reached several thousand percent), to limit roll-overs of loans, to force them to increase affordability checks and, from January 2015, to cap their charges.
Media reports have suggested Wonga has been looking to cut its £8 million a year sponsorship of Newcastle United, now two years into a 4-year contract. On the other hand, it is also possible Wonga will see overseas broadcasting of the Premier League as helpful in helping the company to expand its activity abroad, into markets which lack the financial regulations now being put in place in the UK.
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