Payday lender Wonga saved from oblivion by £10m boost from shareholders

The emergency cash injection was granted after Britain’s biggest payday lender approached its investors for help.

Wonga said its struggles were due to a “significant” increase industry-wide in people making claims in relation to historic loans.

A Wonga spokesman said: “Wonga continues to make progress against the transformation plan set out for the business. In recent months, however, the short term credit industry has seen a marked increase in claims related to legacy loans, driven principally by claims management company activity.

“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 business in 2014.

“As a result, the team has raised £10 million of new capital from existing shareholders, who remain fully supportive of management’s plans for the business.”

Venture capital firms Accel Partners and Balderton Capital are understood to be some of the shareholders that stumped up the cash. Wonga has faced a barrage of criticism over the high interest it charges on its loans and it has been accused of targeting those who are vulnerable.

In 2014, the Financial Conduct Authority said it would bring in stricter affordability checks to the industry and introduce a 0.8 per cent cap on the cost of payday loans on the amount borrowed per day.

Revenues from Wonga’s consumer lending collapsed from £217.2 million to £77.3 million in 2015, with it blaming “stricter lending criteria” and the introduction of the regulatory price cap.

Company chairman Andy Haste said at the time he hoped 2016 would be a “turning point” in the company’s financial performance and was expecting to return to profit the following year.