Wonga aims to transform loan shark reputation
Embattled payday lender Wonga appears to have cleaned up its act, saying it has undergone a massive transformation with plans to diversify into other financial products.
Wonga, which offered short-term loans that had to be paid back in a single instalment, would soon enable customers to repay their loans in multiple, smaller instalments, CEO Brett van Aswegen said on Tuesday.
The lender would introduce, via a partnership model, other financial services offerings, such as saving and insurance products, he said.
Over the last few months, we’ve introduced lots of changes at Wonga to make sure we offer better, fairer loans to customers
Following run-ins with the UK’s Financial Conduct Authority and a compliance notice from the National Credit Regulator, London-headquartered Wonga has struggled to shake its loan shark image.
Its South African founder, Errol Damelin, quit its board in 2014, amid intense scrutiny of the UK’s payday lending industry. At the time, the Financial Conduct Authority ordered Wonga to pay more than £2.6m in compensation for bullying defaulting customers with letters from nonexistent law firms.
"Over the last few months, we’ve introduced lots of changes at Wonga to make sure we offer better, fairer loans to customers," Wonga now says on its website.
The group’s revenue has declined sharply after the implementation of stricter lending criteria, falling 64% to £77.2m for the year to December 2015.
The South African unit was aiming to "break even through our transformation", said Van Aswegen. Wonga had implemented robust affordability assessments, in line with recently promulgated domestic credit laws, as far back as October 2014. This had hurt profitability, he said.
The company charged interest of 3% on all loans to customers, which was below what was allowed in terms of the National Credit Act.
In partnership with Intelligent Debt Management, which owned DebtBusters, Wonga had launched a money academy to provide financial literacy training via short videos.
Educating people about their finances would lead to lower-risk customers in future, Van Aswegen said.
He joined Wonga in 2015 from consumer finance business afb. He left Lewis, where he was credit risk director, in 2011, after more than 12 years there.