The UK’s biggest payday lender Wonga will report collapsing revenues and spiraling losses later this week in response to a slew of scandals, along with regulation changes that threaten the very existence of the payday loan industry.
The lender is due to announce that revenues have dropped by around third to a little over £210 million, Sky News originally reported, and that losses have reached £35 million.
These figures are not expected to include the cost of 325 job losses recently announced by the payday lender’s new executive chairman, Andy Haste. Under a new management team recruited last year, the company is attempting to restructure and diversify its business model in response to a Financial Conduct Authority crackdown on the payday loans industry.
Wonga is trying to renew its license with the financial regulator. The FCA capped loan and repayment charges permitted by the industry in January. Customers cannot be charged more than 0.8 per cent per day, with a maximum fine of £15 for delayed payments, and will never have to pay back more than twice their original debt.
In response, Wonga cut the cost of its loans, lowering its annual interest rate from 5,853 per cent to 1,509 per cent. The company countered by raising the minimum amount customers can borrow from £1 to £50.
Payday lenders will soon have to list their deals on comparison websites, as the FCA and Competition Markets Authority attempt to force more competition and transparency on a controversial industry.
The financial regulator estimates these new rules will force a large majority of the 400 UK payday lenders out of business.
Wonga has also scaled back its marketing campaign, removing controversial ads featuring pensioner puppets that new chairman Andy Chase feared were “appealing to the young and vulnerable“. The payday lender has experienced a significant drop in customers since halting its television ads last summer.
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