LONDON (Reuters) - British short-term loan firm Wonga said on Saturday it had received a 10 million-pound cash injection from shareholders to help the company cope with a rise in claims from former customers seeking compensation.
Loss-making Wonga said it had been hit with “a marked increase in claims related to legacy loans” taken out before 2014, when outrage over so-called pay-day lending prompted new rules to cap the cost of borrowing.
“As a result, the team has raised 10 million pounds of new capital from existing shareholders, who remain fully supportive of management’s plans for the business,” it said in a statement.
Wonga said the loans involved in the surge in claims were made before the company’s current management took over.
Britain’s payday lending industry has been heavily criticised by campaigners who say its high interest rates and marketing tactics have been unfair for vulnerable borrowers.
Privately owned Wonga did not identify the investors. Sky News said they included venture capital funds such as Accel Partners and Balderton Capital who were long-standing investors.
Sky News also said the deal valued Wonga, before its fresh capital, at 23 million pounds, a far cry from an estimated valuation of around $1 billion when it was considering a New York stock market listing.
A spokesman for Wonga declined to comment on the Sky report.
Writing by William Schomberg; Editing by Stephen Powell