Payday lender Wonga caps loan fees as crackdown looms
Britain's biggest payday lender, Wonga, has placed new caps on the cost of its loans ahead of an industry clampdown that comes into force next month.
Starting yesterday, customers taking out a new loan with Wonga, which is working to rebuild its image after being beset by scandal, will see the daily cost of their loan cut from 1% to 0.8%.
Customers will now be charged a one-off fee of £15 if they miss payments instead of £20 previously. The new limits are the maximum that will be allowed across the industry when the City regulator imposes new rules in January.
Wonga, which has more than one million active customers, has also scrapped a £5.50 "transmission fee", which people were previously charged for moving the money that they were borrowing into their bank account.
The minimum amount that a customer can borrow from Wonga has been increased from £1 to £50, to help ensure that it is not possible for customers to end up owing more in fees and interest than the sum they had originally borrowed.
The changes mean that someone borrowing £100 from Wonga for a typical term of 13 days and who does not go into arrears will pay £8.82 less than previously.
The borrower will pay back £110.40 for such a loan, including £10.40 for the cost of that loan. Previously they would have paid back £119.22, including £19.22 in loan costs.
Someone who borrows £100 for 30 days but goes 30 days into arrears will pay £60, some £38.30 less than they had done previously when the cost would have been £98.30 - which is almost the size of the sum borrowed in the first place.
Regulator, the Financial Conduct Authority (FCA), has already warned the industry that the cost of a payday loan will be capped from January 2.