PROFITS at payday lender Wonga more than halved last year after it racked up £18.8 million in costs relating to a scandal over fake legal letters.
The company expects it will be "smaller and less profitable" in the near term as it cleans up its reputation in an industry that has been caught up in controversy in recent years.
The profits figure for 2013 slumped by 53 per cent to £39.7 million, even though it issued 4.6 million loans - a rise of 15 per cent - and lent a total of £1.3 billion in the period. The default rate on loans fell to 7 per cent from 7.4 per cent in 2012.
Wonga, which has come under fire from MPs for charging annual interest rates of more than 5,000 per cent, was impacted by higher operating costs and the one-off charge to cover the historic debt collection and system issues.
In June, Wonga was ordered to pay compensation of £2.6 million by the Financial Conduct Authority after sending threatening legal letters from fake law firms to 45,000 customers.
The FCA said Wonga had been guilty of "unfair and misleading debt collection practices" by creating fake companies to pressure struggling customers into paying.
The regulator is bearing down on all providers of short-term credit, proposing in the summer a cap on payday lending meaning that from next January, interest and fees must not exceed 0.8 per cent per day of the amount borrowed.
It also wants to impose a cap on the overall cost of a payday loan so that it cannot exceed 100 per cent of the original sum borrowed. Payday lenders have been attacked by MPs as a form of "legal loan sharking".
Wonga recently appointed Andy Haste, the former chief executive of the RSA insurance group, as chairman in a bid to clean up its battered reputation.
At the time of his appointment, Mr Haste said: "Some serious mistakes have been made.
"The company admitted those mistakes and it has apologised."
Yesterday's figures include a 56 per cent rise in operating costs.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article