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Wonga records pre-tax loss following £35m customer redress hit

Controversial payday lender Wonga has reported a pre-tax loss of £37.3m for 2014 after taking a £35m customer remediation hit following an intervention by the FCA.

The firm’s full-year results for the 12 months to 31 December 2014, published today, reveal revenues plummeted 31 per cent year-on-year, from £314.7m to £217.2m, driven by a “significant reduction” in UK consumer lending.

Operating costs rose 12 per cent, from £133.7m to £150.2m, while a switch to a new third-party lending platform and risk decision system cost £15.3m.

The £35m remediation costs come after the firm agreed to write off 330,000 customers’ loan balances last year. This followed an FCA investigation which found evidence the payday lender was failing to adequately assess peoples’ ability to meet repayments.

Wonga chief executive Andy Haste says: “On joining Wonga last July, I set out six priorities to deliver essential change and this period has been focused on delivering against those priorities.

“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.

“Today’s results are clear evidence of the changes we have made and are continuing to make. We know it will take time to repair our reputation and gain an accepted place in the financial services industry, but we’re determined to deliver on our plans and serve our customers in the right way.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. I’m guessing that the CEO didn’t take much of a reduction in pay….

  2. Many people would like to see Wonga and similar firms disappear.

    However, they clearly meet a need.

    Not at all clear what alternative would meet that need.

  3. Would this new pious proclamation of lending “responsibly and transparently to customers who can afford to borrow from us” have come about unless the FCA had (rightly) stuck its boot in? It’s hard to imagine why anyone would borrow money on the eye-wateringly usurious terms imposed hitherto by Wonga unless they were absolutely desperate, having already been turned down by all the conventional lending institutions who apply the usual criteria when considering an application. Wonga may have had to improve dramatically the terms of its loans, though one wonders if even these will render them affordable for many of the types of applicants for a pay day loan. On what basis can any organisation (responsibly) approve a loan to someone with a persistently negative monthly cashflow?

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