UK short term lender Wonga forced to write off £220m debt after overhaul

British short-term lender Wonga is writing off the outstanding debt for around 330,000 customers at a cost of about £220 million (HK$2.76 billion), after being forced to overhaul its lending practices by Britain's financial regulator.

The Financial Conduct Authority said yesterday Wonga had entered into a so-called voluntary requirement agreement to make the changes, which ensures immediate redress for consumers while allowing the regulator to continue investigations and possible enforcement action.

It is the starkest intervention to date by the regulator as it clamps down on practices by companies who charge high interest rates for short periods, often dubbed "payday" lenders. Privately owned Wonga is the biggest such lender in Britain.

The bill for compensating customers would come to about £220 million, a source said. That works out at an average of £666 for affected customers.

The company had "significant" provisions to cover the cost of the write-off, the source said. However, the latest in a series of blows to the company will raise questions about its future.

Its profits more than halved last year to £39.7 million after it had to set aside £18.8 million to cover legal fees and fines from regulators arising from a scandal in which it sent fake legal letters to some customers.