Documented cause
Wonga was founded in 2006 by Errol Damelin (South African entrepreneur) and Jonty Hurwitz in London. The model was algorithmically-driven short-term lending: an applicant could request a loan for 1-30 days, complete an online application in minutes, and receive an immediate decision based on Wonga's proprietary credit scoring. The process was fully automated. The business model relied on extremely high APR — up to 5,853% annual percentage rate — which was legal under UK consumer credit law at the time of founding. The high rate was necessary to cover default costs and customer acquisition on small, short-duration loans. Wonga was genuinely innovative in its underwriting technology and user experience; for consumers who needed emergency cash outside banking hours, the product was fast and accessible. The company raised approximately £73M from investors including Balderton Capital (formerly Benchmark Capital Europe) and Greylock Partners and was valued at approximately £1B by 2013. Wonga generated peak revenue of £185M and profit of £62M in 2012. Rapid growth attracted intense media and political attention. A documentary about Wonga's impact on vulnerable borrowers, campaign groups, and parliamentary scrutiny created pressure for regulatory intervention. In 2014, the Financial Conduct Authority (FCA) began transforming payday lending regulation. Wonga was ordered to write off £220M in unaffordable loans owed by 330,000 customers — recognizing that its lending had been irresponsible. The new FCA rules, effective January 2015, capped payday loan interest at 0.8% per day and total costs at 100% of the original loan (a borrower can never owe more than double). These caps made the short-term lending model economically unviable: Wonga's unit economics required the high APRs to cover default costs. From 2015, Wonga operated at a loss. A wave of compensation claims for irresponsible lending pre-2015 further eroded the balance sheet. In August 2018, facing an estimated £400M in compensation liabilities, Wonga filed for administration. Grant Thornton was appointed as administrator. Approximately 40,000 borrowers with outstanding loans at administration faced uncertainty. The FCA eventually established a £400M compensation fund for victims of Wonga's irresponsible pre-2015 lending.
Alternative account: Wonga revolutionised short-term lending with technology: instant decisioning, slick UX, and a brand that made predatory interest rates feel modern and acceptable. At peak in 2012, Wonga was valued at £1B, endorsed by prominent investors, and processing millions of loans. The backlash was equally spectacular. The Financial Conduct Authority imposed interest rate caps that eliminated Wonga's core margin. A scandal erupted when it emerged the company had sent fake legal letters threatening debtors — fabricated law firm correspondence designed to intimidate. Compensation claims flooded in. The company entered administration in August 2018 after failing to secure emergency funding.