INFAMOUS pay-day lender Wonga has been forced to write off the debts of 330,000 customers after it admitted it has made loans to people who could not afford to repay them.

The move follows an agreement with the Financial Conduct Authority (FCA) that requires it to make significant changes to its business immediately.

The review means that approximately 330,000 customers who are currently over 30 days in arrears will have the balance of their loan written off.

Around 45,000 customers who are up to 29 days in arrears will be asked to repay their debt without interest and charges and have the option of paying off their debt over an extended period of four months.

FCA director of supervision Clive Adamson 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.”

But Labour MP Pat McFadden, a member of the Treasury committee, said the response by Wonga was “not good enough” and said bosses should be face questions on their business model and lending practices.

“By not doing proper credit checks, Wonga looks to have built a business on rolling over loans and building up debt for many people who could never afford to repay in the first place,” he said.

“The effect on consumers has been to build up debts at astronomical rates of interest.”