Wonga swings to a loss as UK consumers drop
Payday lender Wonga swung to a loss in 2014, following a major overhaul in its structure and operations.
The group reported an annual pre-tax loss of £37.3m compared with a pre-tax profit of £39.7m in 2013, blaming the drastic turnaround on a sharp drop in lending to UK customers, which led to a 31% decline in revenue on a year-on-year basis.
The lender reported a 36% drop in lending volumes fell to £732m last year, saying it made 2.5m loans in the UK in 2014, compared with 3.7m in 2013, while total customer numbers in the UK fell from about to 575,000 from approximately 1m.
In 2014, the company was forced to apologise and compensate customers for using fake legal letters when chasing debts, leaving the group facing £2.6m in compensation costs.
The company admitted it needed to address "the problems of the past" and is predicting "another tough year in 2015".
"We said Wonga would be smaller and less profitable in the near term as we focus on creating a sustainable business that lends responsibly and transparently to customers who can afford to borrow from us," said chairman Andy Haste.
"We know it will take time to repair our reputation and gain an accepted place in the financial services industry."
Last year, Wonga was also forced to write off unsuitable loans, meaning debts worth £220m from over 300,000 customers were defaulted, because of a failure to assess properly whether borrowers could afford to repay their loans.
Payday lenders now face stricter regulations after the Financial Conduct Authority ruled that customers must face more severe affordability checks, adding it expected a large number of payday loan operators to exit the market as a result.