The payday lending industry in the United Kingdom is under depression. The largest industry player Wonga has reported the first annual loss. The regulatory crackdown on the industry is threatening the very existence of the industry in the UK. The Wonga charged annual percentage rate of whooping 5,000 per cent in the country. The company faced a lot of criticism from the press and public for the same decision. The corporation is now reporting a loss of £42.8m in year 2014.
The profits suffered from the significant decrease in the United Kingdom’s consumer lending market. The group informed the loss of 31 percent or £217.2 million during last financial year. The Financial Conduct Authority, a financial regulator for Great Britain enforced the new rule for governing irresponsible lending within the industry. The financial watchdog during its investigation slapped the company with £35m in remediation costs. The customer forbearance program was recommended by the regulator, which is to be implemented by the company. The predatory lending practices are costing a lot to the British economy and general public as well due to its high-interest rates.
The risk decision engine of the corporation was upgraded and it cost around £15.3 million to the Wonga. The operating costs are all time high (12 percent). The market cost of the operation is £150.2 million per year. Executive Chairman Andy Haste informed that the company is focusing on fair, transparent and responsible lending system. This will make Wonga less profitable as a corporation. It will lot of time to repair the Wonga and make it acceptable as per financial standards.