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Wonga lent more than the entire equity release sector in 2012


Payday lender Wonga lent £1.2bn to customers in 2012 – more than the entire equity release industry lent in total.

The firm’s 2012 accounts, published today, show its lending was up 68 per cent on 2011, when it lent around £707m.

Figures from trade body the Equity Release Council show the total value of the equity release market in 2012 was £925.7m.

Moreover, Wonga also lent around 80 per cent of what the entire bridging industry lent, which is estimated to have been around £1.5bn.

Wonga is also among the top 20 biggest lenders in the UK. Although it does not do mortgage lending, £1.2bn puts it at joint fourteenth with Principality Building Society in the top 20 lenders list compiled by the Council of Mortgage Lenders last week.

It provided around 3.8 million loans to borrowers, up 54 per cent on roughly 2.4 million loans the year before. More than 1 million customers were served in 2012, up 61 per cent on the previous year.

Pre-tax profit increased 35 per cent from £62.4m in 2011 to £84.5m in 2012. The firm says it makes around 5 pence profit on every £1 it lends.

Revenue was up 67 per cent to £309.3m in 2012, from £184.7m the year before.

Wonga founder and chief executive Errol Damelin says: “Our mission is to build an international digital finance group, solving customer needs in a transparent, controllable and responsible way. Last year was another step towards that goal. Group revenue was up 67 per cent at £309.3m with net profit after tax of £62.5m, an increase of 36 per cent.

“This is because our business provides something that a great many consumers and small businesses want – unsecured loans for short periods of time, available online, within minutes and at a completely clear price.”

The payday lending sector will be regulated by the Financial Conduct Authority from April 2014.

Damelin welcomed the regulation of payday lenders in order to “eradicate unscrupulous practices” in the sector.

He says: “We’ve always been a strong advocate of better regulation and measures that seek to protect consumers and eradicate unscrupulous practices used by some operators. It’s on this basis that we look forward to working with the FCA as our new regulator in the UK from next year.”


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There are 21 comments at the moment, we would love to hear your opinion too.

  1. All done at interest rates of 1,000%+ per annum!

    The unwillingness of the banks to lend money to customers has resulted in loan sharks becoming mainstream. What the stats do not show is the defaulters and the cycle of debt into which many borrowers are forced.

    What is the Regulator doing about this situation I wonder? Redecorating the 26th floor again?

  2. A British success story. More please.

  3. Matthew Robertson 3rd September 2013 at 2:59 pm

    The Wonga figures could be skewed though, but not showing what loans were churned (by the borrower, therefore excluding new borrowings to new customers) throughout the year

  4. In the 70’s and early 80’s when I was in the personal credit business with a then major player we charged from 8 ish to 24 ish % pa.

    This was then considered expensive, by the powers that were, at that time.

    How times have changed.

  5. A very sad indictment of the society we live in. They should be embarrassed by their success but I doubt it. They make the banks look like Vestal Virgins.

  6. Our regulators have done the following:

    1. Made it easier to borrow than to invest.
    2. Put financial advice out of the reach of most people.
    3. Added complexity

    And then we wonder why this happens.

  7. @Soren Lorenson | 3 Sep 2013 3:42 pm

    Spot on – it takes circa 8 hours start to finish to complete an advised investment transaction. Wonga can charge a huge APR’s for a transaction covered in a ten minute telephone call.

  8. A few years ago, people doing what Wonga does now would wear donkey jackets, carry pick axe handles and look menacing. Now they have TV adverts, a website and ‘sliders’.

    As a general rule, people who have equity in property will have made some sacrifices along the way and will look to derive benefit in later life.

    Those who need to use firms such as Wonga, as a general rule will have not have done so. The country should take lesons from either the US or Germany.

    If you spend more than you have then it will often have consequences for which too many people wish to blame someone else. The irony that someone looking to invest suffers huge regulatory based costs and intervention whereas such firms………

    That’s why Wonga are taking in more, the world has gone mad!

  9. Before we all get on our high horse don’t let’s forget that Wonga is only for very short term loans. Equity release (when you crunch the numbers) is just as big a rip off, dressed up as doing the client a great favour. This is a loan that’s for life. Basically you sell your home for around 25% to 30% of its value and the lender ends up with 100%. No one bats an eyelid about that.

  10. Like Paul Woolsey as an ex banker, when mkrtgage rates were in doubke digifs in the late 80’s early 90’s Imfelt terribke arrangimg loans at about 20% alr or declining them xcomoletely knowing the only alternative was someome with a donkey jacket, so payday loans, looked like they might be useful for some as a temporary, but extreme solution, but NOT a main stream ongoing tax okn the poor as this has become.

    It is like musical chairs or pass the parcel and I hope the lenders end up holding the debt and problem.

  11. Why isn’t the FSA going to regulate ALL forms of unsecured borrowing? It seems to be dead easy to rack up completely unrepayable levels of debt, then just go bankrupt and effectively dump the debt onto everyone else.

    Shouldn’t unsecured borrowing be limited to a maximum of 3 months nett income and, when the FSA finally gets round to formulating some sort of rules, shouldn’t the APR on short term unsecured loans be limited to something like the average rate for credit cards times no more than 1.5?

    Short term loans at astronomic rates of interest can only leave borrowers worse off in a very short space of time, which constitutes major consumer detriment.

    And, as an aside, we still don’t know why the MoJ instead of the FSA was given the job of regulating CMC’s. I suspect the reason may well be that the FSA didn’t want to be in the position whereby, on one hand, it all but encourages all and sundry to direct complaints to the FSCS whilst at the same time being responsible for putting the brakes on unscrupulous CMC’s doing exactly the same.

  12. This fact illustrates perfectly why regulation has become farcical and part of a truly rediculous nanny state mentality.

    Whilst I am no fan, the fact that Wonga exists and the statistics show apparently (not sure how true but nonetheless) that a high % of their customers are high rate tax payers says everything about how the general public think and act and illustrates why regulation doesnt not work – it should not protect people (grown ups) from themselves – as the Wonga advert says, we tell you what it will cost you upfront and you can decide whether you want it or not – clearly a very large growing number of grown ups do.

    Regulation merely allows those people to blame someone else.

    by the way, agree with Harry about equity release !

  13. For those of you jumping on the band wagon about equity release being a rip off I think the Equity Release Council and ER lenders would strongly disagree. For some people using money from a Lifetime Mortgage to ensure they have a better standard of living than the State can provide is their only/ last resort and for others its a lifestyle choice

  14. @ Anon 4.20

    Why is that any different an excuse than for Wonga. They too use this facility for a better standard and for them it too is a last resort.

    You don’t happen to work for or be associated with an ER provider by any chance?

    How many I wonder would be happy to see their old Mum take out either of these excessively usurious products?

  15. Harry ~ I think you’re confusing Equity Release with Home Reversion Plans. Only (as I understand it) under the latter do householders sell their home outright for a low percentage of its actual value in return for being allowed to live there for the rest of their days. Equity Release is quite different and, many would say, in no way usurious.

    But I’m not a mortgage broker so, if anyone wishes to correct me, I’ll stand corrected.

  16. @Julian & Harry, I am authorised and regulated to provide 1st’charge mortgage advice. I have been qualified to advise on Equity release and home reversion plans since before it became mandatory. Despite that I have only arranged about 4 lifetime mortgages and never arranged a Nome reversion plan simple because so few of my clients have needed this facility yet. J regularly mention it SK my clients don’t get a shock when or jf J say it would,d be a good idea for them.

    A bad work mam blames his tools. Lifetime mortgages and payday loans are just a tool unfortunately, too many tools misuse the available tools.

  17. Yes Harry

    And with the demise of the interest only mortgage
    and MMR regulation more and more people will be driven into expensive equity release and home reversion where previously other sensible and more cost effective options would have existed – regulatory and governmental interference in markets again and the unintended (or perhaps absolutely intended) consequences of such interference – where if left alone market solutions would be found that worked for both the grown ups involved in the transaction !

  18. Dear Julian

    I am pleased to correct you. Yes, what you say about home reversion is true. However the amount (I.e. the percentage) in this case is fixed – it is rarely if ever 100%, more like 80% or so – so at least here the owner has a small amount of equity left. If the price of the property rises the percentages are still pro rata and vice versa. In this case at least the owner knows exactly where they stand.

    On a lifetime mortgage the lender will only advance a maximum percentage of value of the property. At the interest rates charged and assuming to growth in property value, the lender will own 100% within about 12 years – on average. If the property owner lives long enough the lender will eventually own 100% unless values go ballistic.

    Either way if these are not rip offs, I wonder what your definition of a rip off is? Is it any wonder that ER pays stratospheric commissions (yes commissions are still permitted in these cases) which cannot be rebated back into the plan to improve terms. (Yes you can hand the money back to the client).

    However I do see that in certain very rare cases this ‘service’ may just possibly be of value to a client. I guess the same goes for Wonga.

    @ Phil

    May I correct the last part of your last sentence? “…….too many fools misuse the available tools”. And some tools are only there for the direst of emergencies and not to be used without extreme caution.

  19. Julian – there is a very simple answer to your question as to why the MOJ – well not really, it is actually Staffordshire County Council, got the job of regulating CMC’s – LOWEST BIDDER.

    I’m not entirey sure how you jumped to the issue of who regulates CMC’s but i am sure it is connected with the point raised by Mr Sprinkler. Regulations aren’t there to protect people from themselves, they are there to protect the public from unscrupulous people.

    As with short term loans and equity release they are appropriate for the right people in the right circumstances, but are not and should not be promoted as ‘mass market’.

  20. @ Harry I agree. One of the reasons I have the LTM and Home Reversion qualifications is so I can advise NOT to do something (yet) for an individual.

    LTM, Home Reversion and payday loans should not be las market, nor incentivised by commission.

  21. Why does it take 15 mins to transact a 3000%ape loan and over 4 hours (inc recearch and admin time) to advise on a £50 PCM savings ISA??
    Regulation, regulation and more regulation!! Nearly £1.6 billion cost and that was just for RDR

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