This article is more than 2 years old

This article is more than 2 years old

Britain’s biggest payday lender, Wonga, has received a £10m emergency cash injection from shareholders to save the company from going bust. The short-term loan firm said the development was a way of coping with a surge in claims from former customers seeking compensation.

The claims, said Wonga, related to loans taken out before 2014, when outrage over its payday lending offers prompted new rules to cap the cost of borrowing. The UK’s payday lending industry has been criticised by campaigners who claim its high interest rates and marketing tactics unfairly target vulnerable borrowers.

A Wonga spokesman, confirming the £10m injection, said its shareholders remained “fully supportive of management’s plans for the business”.

“Wonga continues to make progress against the transformation plan set out for the business. In recent months, however, the short-term credit industry has seen a marked increase in claims related to legacy loans, driven principally by claims management company activity.”

The lender was forced to scrap its business model after running into regulatory problems and because of the cap on loan rates introduced by the Financial Conduct Authority in 2015.

Wonga announced a loss of nearly £65m in 2016, but insisted it was on track to return to profitability in 2017.

The company has had a controversial past. In 2015, an inquest into the death of Kane Sparham-Price, a disabled teenager from Greater Manchester, found that he had had “numerous problems including those connected with his mental health”. He killed himself on the same day that Wonga emptied out his bank account for debts he owed the firm.

In 2014, the Financial Conduct Authority introduced a cap of 0.8% of the amount borrowed per day on the cost of payday loans. Later that year, the Church of England cut its financial links with Wonga.

The archbishop of Canterbury attacked payday lenders in 2013, claiming they had destroyed lives and said that he wanted to “compete Wonga out of existence”.