Member Article

Wonga sees profit slump despite attempts to clean up its act after scandal

Controversial lender Wonga has reportedly seen its profits slump last year amid trading difficulties in its overseas and small business operations as new boss Andy Haste attempts to clean up the payday lender’s act.

Sky News has reported that Wonga is expected to publish annual results for 2013 showing a slump in pre-tax profits from £84.5 million last year to roughly £50 million in 2013.

These results are for the period before it emerged that the company had invented law firms to frighten customers into paying up, prompting regulators to effectiely fine the finance firm £2.6 million to compensate nearly 50,000 customers.

Wonga’s results are expected to include a big one-off exceptional charge to cover legal and regulatory costs related to the fake legal letters scandal.

The City regulator is also bearing down on providers of short-term credit, proposing in July a cap on payday lending meaning that from next January, interest and fees must not exceed 0.8% per day of the amount borrowed.

The Financial Conduct Authority is also imposing a cap on the overall cost of a payday loan so that it cannot exceed 100% of the original sum borrowed.

Executive chairman Andy Haste will reportedly be paid an initial £500k a year to help clean Wonga’s act.

Wonga’s small and medium-sized business-lending arm, Everline, is also thought to be losing money, as are some of the company’s international operations.

Andy Haste told Sky News in July: “I want to ensure that the business operates responsibly while providing an effective and reliable service for our customers. I have a clear mandate from the shareholders in Wonga to lead that process, both in the UK and across our international operations.

“I have asked all the questions I can think of asking, and I believe I’ve been made aware of everything,

“Time will tell whether that’s the case.”

This was posted in Bdaily's Members' News section by Clare Burnett .