The ugly reputation among payday lenders, along with regulatory crackdowns in the market, have fractured the UK’s largest industry player.
According to Tuesday reports (Feb. 24), Wonga Group revealed plans to cut its workforce and nix its small business lending operations. A total of 325 jobs will be eliminated, the company said, amounting to more than one-third of its workforce across the UK, Ireland, South Africa and Israel. It plans to close its Tel Aviv location altogether by the middle of this year and shutter the doors of its Dublin location by mid-2016.
Overall, Wonga said it will look to reduce costs by as much as £25 million by 2017.
The restructuring efforts are part of the lender’s decision to refocus on short-term loans for individual consumers, the company said.
The UK Financial Conduct Authority recently targeted the payday lending industry with the aim of capping interest rates that critics say are unfairly high. Reports say the watchdog has now ordered payday lenders to make details of their loan products available on at least one price comparison website in efforts to improve transparency among the lenders.
Until last year, Wonga had advertised online its yearly interest rates set a 5,853 percent. Regulations will cap that rate at a 292 percent annually, according to reports.
Wonga also raised significant controversy in recent months that, for some, epitomized the troubles of the payday loan industry. Last June the company agreed to pay £2.6 million to settle allegations it sent tens of thousands of customers' letters from fake law firms threatening legal action to coax recipients into paying back their loans.
Last October, regulators had the company reduce the debts of 330,000 of its loan customers by hundreds of millions of pounds and waiving interest fees for an additional 45,000 borrowers.