3rd July 2016
Wonga is a name that has been in and out of the headlines since the crackdown on payday loan lenders began. The lender reported pre-tax losses of £80.2m for the year – up from £38.1m the previous year.
Wonga, although not solely operating in the UK, do their majority of business in the UK short term lending market with it making up 95% of their loans.
The huge drop in their revenue and increase in losses are a shocking change from the huge profits reported before 2015. This is down to the new FCA lending rules introduced in 2015 which has seen their loans fall from 4 million to just 2.1 million.
Wonga was also in the press for sending out fake legal to borrowers and were made to clear debts and charges totalling £220 million.
The new rules saw a daily cap on interest of 0.8% as well as a maximum default fee of £15. As well as this, the maximum repayment on a loan, including fees, could not exceed 100% of the loan amount.
According to Wonga’s reports, revenues from interest fell by over 60%, from £157m to £46m.
Even with the new financial reports, Andy Haste, Wonga’s CEO said he expected 2016 “to mark a turning point in our financial performance”, and said the firm expected to make a profit again next year.
Haste said: “We have made real progress towards creating a sustainable business with an accepted place in financial services.” Since all the bad press, Wonga have relaunched their ad campaign with the absence of the widely recognised puppets which were deemed as targeting younger borrowers.
Haste also went on to say that his new management team had a brand new approach to credit risk; this is backed by the figures, defaults at the firm fell from 6.6% to 2.8% in the UK.
Earlier this year, the FCA granted Wonga a lending license marking its position as a responsible and accountable lender.
The firm also had a restructure that saw 200 jobs cut and an overhaul of an ‘inefficient’ computer system. The company s adamant that despite its name being dragged through the mud, the name Wonga would remain rather than attempting to “do a brandwash and run away from the past,” said Haste.
The increased losses are a sign of just how much was being made from people in a weak financial position and how much of a difference the new rules have made. Fairer lending is crucial to helping people to get back on their feet so make sure to compare lenders when looking into short term payday loans.