Wonga ‘on brink of collapse’ after payday loan company was overrun with compensation claims

PAYDAY loans giant Wonga is said to be on the brink of going under.

The company was kept afloat three weeks ago thanks to a £10million emergency cash injection from shareholders.

But sources say it merely encouraged a new wave of compensation claims for alleged unfair debt collection practices.

Wonga has been accused of targeting vulnerable customers and charging sky-high interest.

Administrators are understood to be on stand-by to take over the loans giant if it is declared insolvent.

Insiders say news of the lifeline only spurred fresh legal action from claims management companies who have been circling Wonga for years.

The firm started in 2007 offering quick-fix loans at astronomical interest rates. Business boomed in the wake of the 2008 financial crash.

At one stage it sponsored Newcastle United and it was estimated Wonga could be worth as much as £1billion.

But claims of loan-sharking and street protests about its tactics damaged its reputation.

New loans rules introduced in 2014 and lawsuits over alleged irresponsible lending hit profits. Wonga, owned by venture capitalists Balderton Capital, Accel Partners and 83North, lost £65million in 2016.

City pundits now believe financial results for 2017, when Wonga hoped to make a profit, will not be good enough.

Sky News yesterday reported that professional services firm Grant Thornton is being lined up as an administrator.

City regulators are believed to be in talks with Wonga over selling parts of the firm in an effort to save 500 jobs.

Wonga said: “The Wonga board continues to assess all options regarding the future.”

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