Payday loan company Wonga has announced that it has entered an agreement with the Financial Conduct Authority (FCA) in a move that will see it make substantial changes to its business operations.
The FCA took over the regulation of consumer credit in April of this year, with one of its first courses of action seeing it request information from Wonga about its volume of relending rates.
As a result, it found that Wonga was not taking enough care to assess the ability of customers to sustainably meet repayments.
The FCA has since agreed an approach with Wonga for remedial redress for the customers that were affected by inadequate assessments.
It means around 330,000 customers currently in excess of 30 days in arrears, will have the balance of their loan written and their debt with Wonga cleared.
Another 45,000 customers with debts up to 29 days of arrears will be asked to pay back their loans without interest and charges, while also being given the option of paying off their debt over the course of an extended period of four months.
Those affected will be contacted by October 10th, although will still be required to make payments, unless they are told to stop by the firm.
Any borrowers experiencing any financial difficulty should contact Wonga to discuss their options.
Clive Adamson, director of supervision, said: "We are determined to drive up standards in the consumer credit market and it is disappointing that some firms still have a way to go to meet our expectations. This should put the rest of the industry on notice – they need to lend affordably and responsibly.
“It is absolutely right that Wonga’s new management team has acted quickly to put things right for their customers after these issues were raised by the FCA.”
In the meantime Wonga has introduced a number of pieces of lending criteria that it hopes will improve customer experiences.
There are also plans to introduce new temporary measures aimed at improving the experiences of customers, with a permanent decision expected to be made imminently.
The FCA has implemented measures that will see Wonga appoint someone to monitor the new platform for making decisions about lending in order to ensure they have the desired effect.
The new role will see an appointed member of staff report to the FCA, giving the regulator an independent review of the company's activities.
The FCA's move comes amid the release of a report by Citizens Advice, claiming that many payday loan customers needed more information ahead of borr