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Wonga Unveils Record £63m Profits For 2012

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General view of the website of payday loan company Wonga, as the company has entered the online payment industry by offering shoppers the option of borrowing cash to fund their web purchases. | PA

Wonga has posted record profits on Tuesday of more than £1 million per week for 2012, despite the firm being caught up in controversy over payday lending.

The payday loans firm posted increased profits of 36% for 2012 over the previous year, thanks to a huge boost in customer numbers and ongoing international expansion.

Meanwhile, the number of people who defaulted on their loan increased to 7.4% in 2012, over 6.7% in 2011, which Wonga founder Errol Damelin, who is on a £754,000 salary, said was a side-effect of an increase in the firm's customer base.

The firm's revenues for 2012 soared by 67% to £309.3 million, with a total of £1.2 billion lent over the year. This marked a 68% increase in the amount of money lent by Wonga, with 4 million loans provided in total.

Damelin confirmed that Wonga continue to avoid issuing a dividend and instead sink its company profits back into growing the business further. The financial services firm saw its net profits triple to £45.8m in 2011 from £12.4m in 2010, while revenue grew to £185m.

Wonga's financial success comes despite the firm being bogged down in payday loans controversy after Archbishop Justin Welby said he had told Damelin he would "compete [Wonga] out of existence" by supporting rival credit unions.

The remarks sparked an embarrassing climbdown from the Archbishop however when the Church of England's pension fund was found to be an investor in Wonga. The Office for Fair Trading recently announced that 15 out of 50 payday lenders said they would quit the industry after being given a deadline to tighten up their business practises.

In response to criticism, Wonga said on its website: "Since 2007, Wonga has responsibly lent over £2bn and we now have over a million customers.

"We've done that despite declining three quarters of all first loan applications and ensuring a principal default rate (money lent that we don’t get back) of around 7%. This is comparable to other forms of short-term credit, such as credit cards.

"We work hard to lend only to the people who can pay us back, and our mainstream services for individuals and businesses are now available across three continents."

Wonga declined to comment on Sky News' report, with a spokesman dismissing it as "pure speculation".

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