Customers who were mis-sold loans by the collapsed payday lender Wonga are expected to receive less than 10% of what they are owed in compensation after administrators revealed that only £41m will be put aside for claimants.
Administrators for Wonga, which collapsed last year, also revealed that they had scrapped plans to sell its loan book, saying there were doubts that bidders met the criteria, including properly approaching customers for debt payments on outstanding loans.
The news comes nearly a year after the Church of England walked away from talks to buy the loan book, with the aim of protecting vulnerable customers.
Wonga was brought to its knees in summer 2018 after a spike in complaints over excessive charges on historical loans that in some cases came with interest rates topping 5,000%.
The joint administrators at Grant Thornton said customers had already lodged 560,982 claims over their treatment by Wonga at the end of August, 389,621 of which were eligible for redress payments. That number is expected to have risen up to the time the claims deadline closed at the end of September.
Administrators at Grant Thornton said the average claim was for about £1,181, and that the total redress amount at that time was £460m. But with £41m expected to be available to eligible claimants – categorised as unsecured or redress creditors in the report – the average payout could be worth just £118. There are plans for the claims to be paid by the end of January 2020.
Administrators admitted that “the payment will be significantly less than the full value of the accepted claim”.
“The return to unsecured creditors is currently unknown due to both the level of redress creditors and ultimate realisations from Wonga UK still being unknown,” the report said. However, the latest directors’ statement said “the funds to unsecured creditors could exceed £41m before costs of realisation”.