LONDON (Reuters) - Britain's biggest payday lender Wonga will hand customers struggling to pay back debt a three-day grace period before applying default charges, as part of efforts to rebuild its battered image.
Wonga grew rapidly in Britain, filling a gap left by banks retreating from short-term lending to customers following the financial crisis of 2007-9. At its peak in 2012, it was making a pretax profit of over 1.5 million pounds a week.
But the business, founded by South African entrepreneur Errol Damelin, hit trouble when its sky-high interest rates came under scrutiny from lawmakers and its debt collection practices, including sending its customers fake legal letters, were exposed by Britain's consumer watchdog.
New Chairman Andy Haste, a former chief executive of British insurer RSA (L:RSA), has vowed to overhaul the way the business is run, and Wonga plans to focus on lending responsibly to customers who may be "cash and credit constrained".
Wonga said on Tuesday that, if a customer is late with a repayment, it will allow three days before applying a one-off default fee of 15 pounds.
In addition, all customer balances in arrears will be frozen after a maximum of just seven days, compared with an existing 30-day limit. Wonga is also offering a 24-hour money back guarantee to customers who change their mind and want to cancel their loan.
