Payday Lender Wonga Expected To Report Sharp Fall In Profits

Sharp Fall In Profits Expected For Wonga

Controversial payday lender Wonga is expected to report a sharp fall in profits when it publishes its full-year results tomorrow. The firm, which has been attacked by MPs for charging interest rates of over 5,000%, is forecast to post annual profits of about £50 million for 2013 compared with £84.5 million the previous year, according to Sky News.

The slump in profit is reported to have come from difficulties at its overseas and small business operations. In July it brought in the former chief executive of the RSA insurance group, Andy Haste, to head the group, replacing founder Errol Damelin who left earlier in the year, in a bid to clean up its battered reputation.

At the time of his appointment Mr Haste said: "This is a sector and Wonga is a company that needs to go through significant change if it is to have a sustainable future. Some serious mistakes have been made. The company admitted those mistakes and it has apologised for those mistakes."

In June Wonga was fined £2.6 million for sending threatening legal letters from fake law firms to 45,000 customers by City watchdog The Financial Conduct Authority (FCA).

The FCA said Wonga had been guilty of "unfair and misleading debt collection practices" by creating fake companies to pressure struggling customers into paying their bills. Pay lenders have been attacked by MPs as a form of "legal loan sharking".

In July the Church of England ended its indirect investment in Wonga - a holding that embarrassed the Archbishop of Canterbury, Justin Welby, who said he wanted to compete Wonga out of existence by boosting the use of credit unions.

The FCA is also bearing down on providers of short-term credit, proposing earlier in the summer a cap on payday lending meaning that from next January, interest and fees must not exceed 0.8% per day of the amount borrowed. It also wants to impose a cap on the overall cost of a payday loan so that it cannot exceed 100% of the original sum borrowed.

Earlier this month in a bid to beef up the personnel at the payday lender Mr Haste brought in Tara Kneafsey as managing director of its UK consumer loans business. Ms Kneafsey had previously spent six years at insurer RSA.

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