Disgraced payday lender Wonga sells sme to Orange Money, cuts 325 jobs – TechCrunch


No more fraying for Wonga, the UK-based online lender who last year had to write down £ 220million ($ 340million) in unpaid loans. The company announcement today that it would lay off 325 employees and that it also sold Everline, its small business lending arm, to Orange Money (trader as Ezbob). On top of that, former Wonga chairman Robin Klein of Index Ventures has resigned from the company’s board of directors.

The index itself is not an investor in Wonga, who raised more than $ 145 million since it opened in 2007. Investors include Accel, Balderton, Greylock and others.

These measures come after a scandalous period for Wonga. The company, along with other online payday lending businesses, has been the subject of an investigation by the UK Competition and Markets Authority into its lending practices. The investigation, opened in June 2013, released its final report today – we integrate it below.

Wonga has been criticized for how well (or poorly, as the case may be) assesses the suitability of loan applicants, as well as the practices she uses to collect bills. One of his tactics (now abandoned) was to send letters pretending to be law firms to intimidate customers into paying.

In total, Wonga had employed around 950 people in the UK, Ireland, South Africa and Israel before the layoff was announced. The aim is to continue restructuring until 2015.

“Wonga can no longer maintain its high cost base which must be significantly reduced to reflect the evolution of our business and our market,” Andy Haste, president of Wonga, said in a statement. The restructuring is expected to save the company £ 25million over the next two years, he added.

It’s unclear what this reduction will mean for Wonga’s bigger ambitions. In 2013, before investigations and write-downs wreaked havoc, the company had acquired a startup in Germany called BillPay to expand further into Europe and also to engage in payments.

Klein’s place on the board will be taken by Simon Allen. He joins a board that also includes Wonga CTO Paul Miles, UK CEO Tara Kneafsey and two other non-executive directors who have yet to be appointed, the company said.

Financial terms of Everline’s sale were not disclosed, but it is a small part of Wonga’s overall business. Orange Money – no connection to France Telecom’s Orange – claims that together the two have loaned more than £ 54million ($ 83million) since 2012, covering around 5,000 companies.

The services both use online algorithms to assess a potential borrower’s creditworthiness, much like cabbage outside the United States (Kabbage, Kreditech and other online lending companies use an algorithm that integrates “signals” from various sources such as online bank accounts, e-commerce histories, social media and more again to determine the likelihood that a borrower will be able to repay or default on a loan.) Now Orange Money will use the combined power to increase the ceiling on loan amounts, which can now reach £ 150,000 on 18 month terms, against £ 50,000 on 12 month terms. Prices will also drop, according to the company.

“Collectively, we are now the UK’s largest commercial e-lender and remain focused on providing more businesses with the finance they need to fuel and support growth,” said Tomer Guriel, CEO of Orange Money Ltd, in a press release. “Our market-leading technology platform complements Everline’s well-positioned brand – the combination of the two will accelerate our growth, which has already more than doubled year on year for each brand since launch.

The company will retain Russell Gould, who was Everline’s managing director, as the new COO of Orange Money.


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