Wonga Hit With First-Ever Annual Loss

As the U.K. introduces new payday lending regulations, one industry player, Wonga, has fallen on hard times. Earlier this year the firm decided to abandon its small business lending arm, and revealed plans to cut 325 jobs – more than one-third of its total workforce across the U.K., Ireland, Israel and South Africa. The company said it planned to close its Tel Aviv office altogether.

On Tuesday (April 21), bad news emerged from the firm as Wonga announced its first-ever annual loss. Experts at the Financial Times reported that this loss can almost certainly be attributed to the harsh regulatory crackdown on the payday lending industry. Wonga was especially criticized by policymakers and consumers alike for high interest rates and fees.

Wonga reported a 2014 net loss of £42.8 million ($63.9 million), and its executive chairman, Andy Haste, said that the company does not expect any profit in 2015, either, with Haste adding that this is expected to be “another tough year” for the firm. On top of the already massive reduction of the corporation, Haste said that he will be introducing sweeping reforms into the company.

“It’s important for Wonga to demonstrate real change from within and not rush into a rebranding exercise that could be misinterpreted as a brand-wash,” the executive said. Rather, Haste plans to “refresh” the brand through various re-launches of the company’s image this year, beginning in the coming months. These overhauls, reports said, would include efforts to reduce Wonga’s dependence on payday loans and adding longer-term loans into its financial product offering.

The U.K.’s payday lending market as a whole has been hit hard by legal changes. According to reports, the Financial Conduct Authority is expecting nearly all of the current 400 payday lenders to shutter their doors thanks to new caps on how much interest these firms can charge borrowers.

Regulations came into effect early this year that cap interest rates at 0.8 percent a day on all short-term credit loans. For borrowers that default on their repayments, the FCA has banned payday lenders from charging any more than 100 percent of the value of the original loan.