Wonga just went into administration and loan sharks haven't taken over the country – a bit of red tape isn't so bad after all

Sometimes the state does have to step in and say: sorry but no, this business is engaged in an activity that is damaging and thus requires intervention

Wonga drew in people who might otherwise have found better ways to handle their financial issues than resorting to ruinously high interest loans hawked over the internet (Getty)

It looks like wonga.com has finally run out of wonga. And rope. The payday lender that relaunched itself after a string of ugly scandals has just gone into administration.

Grant Thornton has been lined up to do the job, as Wonga grapples with the after effects of its misdeeds resulting in a surge of compensation claims.

The lender used to hawk its wares with puppets that looked like cute grandparents. But they had a dark side. The company that created those puppets charged four-figure APR interest rates, let its customers repeatedly roll over loans and build up debt they could never afford to repay, and even sent out fake lawyers letters to harry tardy payers.

It’s easy to forget just what a malign entity the first incarnation of this outfit was before the Financial Conduct Authority (FCA) rode in on a fiery charger with new regulations and a price capping regime.

Did I say fiery charger there? Sorry, sweaty carthorse might be a more accurate description.

Regulators were initially wary about putting a lid on the charges companies like Wonga could levy.

Such things are anathema to economists in this country. Look at Venezuela! It’ll be anarchy, I tell you! Anarchy! If we squeeze Wonga, Len’s Loansharks will take its place and start filling up A&Es with broken legs. Best we leave well alone.

Those arguments held sway with a lot of politicians, as well as the regulators, until that is the realisation dawned that Wonga didn’t look all that different from a loanshark, given the tactics it was using to get its hardpressed borrowers to pay up.

What Wonga and its pals did was to create a market that previously didn’t exist. It drew in people who might otherwise have found better ways to handle their financial issues than resorting to ruinously high interest loans hawked over the internet.

As well as young professionals seeking a little extra spending money for hedonistic weeks in Ibiza, or even big nights out in Blackpool, it was also made up of families with children, who might have fixed their short-term issues with Wonga loans but then found themselves going without to pay them back.

The social harm was obvious.

Call it the nanny state if you want, but sometimes people have to be saved from themselves.

Sometimes the state does have to step in and say: sorry but no, this business is engaged in an activity that is damaging and thus requires intervention.

The payday loans market is an example of that. And you know what, the roof didn’t fall in when the FCA finally clipped its wings. Imposing a price cap, and limiting people’s repayments to no more than twice their borrowing, forced the industry to tighten the taps.

But Len’s thugs haven’t created a crisis for the NHS by breaking lots of people’s legs as the payday lenders’ shills were apt to warn. We have Theresa May’s government for that. People readily found alternative sources of credit.

You actually could make a case that it has proved too easy for them. Britain’s stock of unsecured debt is rising at an alarming rate and more intervention may be required. But that’s an argument for another day.

For now, it’s worth reflecting on the clampdown on Wonga and its payday lending peers as an example of a highly successful intervention by the City regulator. Sometimes regulation is a thoroughly good thing. We should remember that the next time a Tory politician stands up to rail against ‘red tape’, because society is all the better for the demise of the first incarnation of Wonga.

Even though the second one offers savings and budgetary advice to its customers – it really does – society will shrug of its demise too, if that’s what happens.

The FCA’s carthorse might be a plodder. But sometimes plodders can turn out to be winners.