The payday lender Wonga has seen its profits fall by more than half after a year marred by controversy.
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Wonga, the UK’s largest payday lender, reported pre-tax profits for the year ending in December 2013 of £39.7 million. In 2012, the company raked in £84.5 million – a fall of 53%.
Largely responsible for this, is the £18.8 million that Wonga was forced to pay in “remediation costs”, after it was revealed the firm sent fraudulent legal letters to customers.
The letters, sent between 2008 and 2010, threatened legal action over unpaid debts, but were sent by Wonga under the guise of fictitious law firms.
Wonga, like other payday lenders, has also been heavily criticised for its high interest rates, which critics say are exploitative.
As of October last year there were at least 90 payday lenders operating in the UK, but the three largest lenders – including Wonga – accounted for about 70% of total revenue.
Recently released figures have also revealed that the number of complaints made against payday lenders has more than doubled over the past two years.
As a cheaper and more ethical alternative to payday lenders, many commentators have recommended that consumers turn to credit unions.
Reporting its results, Wonga said it would be “smaller and less profitable in the near term”, but revealed it was pushing ahead with plans to expand its international business.