Home England Income Tax Wonga losses more than doubled | Wonga

Wonga losses more than doubled | Wonga

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Controversial lender Wonga more than doubled its losses in 2015 as tighter regulation of the payday lending sector resulted in a sharp decline in UK consumer borrowing.

The UK’s largest payday loan company reported a pre-tax loss of £ 80.2 million for the year, compared to £ 38.1 million a year earlier. After tax, the company lost £ 76.5 million from £ 43.6 million in 2014.

Although the company has holdings in other countries, its UK short-term loan division is at the heart of its business, and in 2013 UK customers accounted for 3.8 million of the 4 million loans.

The drop in revenue to £ 77.3m from £ 217.2m in 2014 was caused by a drop in lending following the introduction of stricter end-of-year criteria and the new price cap for payday lenders in early 2015, the number of loans taken out fell to 2, 1 million

The losses are in dramatic contrast to the company’s huge profits before the Financial Conduct Authority (FCA) took over regulation of the sector two years ago. It limited the number of loan renewals and the number of times lenders could attempt to collect repayments from borrowers’ bank accounts.

Months after the FCA intervened, Wonga became embroiled in a scandal for mailing fake legal letters to troubled borrowers, paying overdue debts or fees for 375,000 people at a cost of £ 220 million. The company said the process of refunding affected customers was “largely complete” but left £ 10 million for those it had not yet contacted.

In January 2015, interest and fees on all high-cost short-term credit loans were capped at a daily rate of 0.8% of the loan amount. If borrowers fail to repay their loans on time, late fees cannot exceed £ 15 while the total cost including fees and interest is limited to 100% of the original amount.

Wonga’s results show that interest income has fallen by more than two-thirds from £ 157 million to £ 46 million.

Despite the declining sales trend, CEO Andy Haste said he expects 2016 to be “a turning point in our financial performance” and that the company will return to profitability next year.

Since moving from the insurer RSA to the top, Haste has tried to reposition Wonga as a company for medium-sized customers. He dropped the controversial wonga dolls and relaunched the brand in May 2015 with new TV commercials.

Haste said, “We have made real strides in creating a sustainable company with a recognized place in the financial services industry.

“These results are in line with the plans we made when we joined Wonga. They reflect the impact of the stricter lending criteria we introduced in late 2014, the price cap introduced by the UK regulator in early 2015, and the investments we made to transform the business for a full year. We expect 2016 will mark a turning point in our financial performance. “

Haste said the new management has revised its approach to credit risk. Corporate defaults decreased from 7.4% to 4.4% and in the UK from 6.6% to 2.8%.

“We are pleased with the progress we have made and are pleased to have received approval from the Financial Conduct Authority earlier this year.

“At the beginning of 2016, our plans included gaining UK approval, borrowing and introducing new products. After we achieved this and further financing is planned for the end of this year, we are now in a position to return to growth in 2016 and expect to return to profitability in 2017. “

Haste and his team said they overhauled the lender’s computer systems that were “not serviceable” and completed a layoff program that left 200 employees.

They said the Wonga name would be retained despite its tarnished reputation. “We have always said from the start that we don’t just want to change the name, we want to show that change can be implemented instead of trying to run away from the past,” says Haste.

“We were considering whether one day Wonga would be a product name for the kind of credit we are currently giving, and we have other names for other things, but we are still a bit away from that.”


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