Wonga makes £37.3m annual loss

Posted by Rebecca Stains in Personal Finance on 27 April 2015 - Rebecca worked as a Credit Analyst at checkmyfile until 2015

Britain's biggest payday lender has reported an annual loss of £37.3m. Wonga, which made a pre-tax profit of £39.7m in 2013, saw a large drop in its lending to UK consumers.

In the wake of regulatory action from the Financial Conduct Authority (FCA) taken over the past year, the company announced its pre-tax loss. Along with this serious loss of profit and customers, Wonga has said a review of its business would also result in hundreds of job losses.

It’s not been a great year for Wonga, who had PR disaster last June when it was ordered to pay £2.6m in compensation to 45,000 of its customers for sending threatening legal letters sent from fake law firms. Following this, it later said it had written off £220m of debt belonging to 330,000 people, after giving loans to people who could not afford to make the large repayments.

Wonga’s executive chairman Andy Haste said, "We know it will take time to repair our reputation and gain an accepted place in the financial services industry, but we're determined to deliver on our plans and serve our customers in the right way”.

The company is unlikely to diversify beyond short term loans but they may be considering offering credit cards.

It’s not just Wonga who need to make drastic changes, other payday lenders also face strict new rules from the Financial Conduct Authority (FCA). The FCA ruled last year that customers must face stricter affordability checks. It has estimated that the majority of the estimated 400 payday lenders operating in Britain will go out of business, due to the introduction of a price cap in January on loan and repayment charges. However, the FCA is yet to release figures on the number of firms that have applied to continue operating.

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