Payday Lender Wonga Writing Off 330,000 Customers Debt Worth £220m

Britain's biggest payday lender has revealed that it is writing off £220m worth of debt for 330,000 customers after the Financial Conduct Authority found that it had "inadequate affordability assessments" of some of the country's most financially vulnerable parts of society.

Wonga announced in a statement that it will compensate £666 (€852, $1000) on average per customers after it agreed to overhaul its lending practices as part of an agreement, known as a voluntary requirement (VREQ).

Subsequently, it added that it would accept "significantly fewer" loan applications and will mean existing customers will no longer be able to borrow from it.

"It's clear to me that the need for change at Wonga is real and urgent," said Wonga's new Chairman Andy Haste.

On the same day, the FCA said that information it gathered, after requesting information about the volume of Wonga's relending rates, showed that the payday lender was not taking adequate steps to assess customers' ability to meet repayments in a sustainable manner.

The UK payday lending sector is worth £2bn ($3bn, €2.3bn) in the UK. Its value has doubled since 2008/2009.

Current figures show that this corresponds to between 7.4 and 8.2 million new loans.

Despite these loans being described as one-off short term loans, costing an average £25 per £100 for 30 days, up to half of payday lenders' revenue comes from loans that are rolled over or refinanced.

Interest rates on the short term loans can reach highly inflated levels.

Wonga's representative APR on a loan is at 5,853%, according to its website.