Following the release of Wonga’s latest financial figures, which show the payday loan provider made a £37.3million loss following a significant reduction in UK consumer lending, it has now rolled out its revamped payday loan offering in an attempt to withstand tougher industry regulations. This will be accompanied by a new advertising campaign – although you should not expect to see a return of the payday lender’s controversial puppets.
The group, whose revenues fell by almost £100million for the financial year 2014/15, unveiled its enhanced short-term credit products as the first part of a series of developments designed to reshape the company. In a complete change of direction, the group is now targeting its loans at ‘hard-working people’.
While Wonga has been licking its wounds after a disastrous 2014, the market has blown wide open for a plethora of new lenders, with payday loans newcomer wizzcash.com stepping in to fill the void in the Google search results.
Despite a series of controversies that transformed Wonga into the UK’s leading pantomime villain for much of the past year, the incoming executive chairman, Andy Haste, decided against changing the Wonga name for its payday loan offering. However, the company is looking at alternative names for the group’s new range of longer-term financial products, which it intends to launch later on in the year.
The lender has made significant changes to its payday loan product, in keeping with tough new rules imposed by the Financial Conduct Authority (FCA), the City watchdog charged with regulating the industry. The lender has updated its payday loan offering with a range of new features, including a freeze on balances in arrears after seven days, a move designed to protect customers from spiraling debts.
There will also be a sea-change in the way the products are marketed. The onus will now be on attracting the right type of customer i.e. ‘hard-working people’, rather than the vulnerable or the very young.
New licensing laws
In a further attempt to weed out dodgy firms, all payday lenders have had to apply for a license to trade, and will learn over the coming months whether they have been successful. Many lenders have failed to apply for their license given the strict new rules imposed by the City regulator, and this is expected to put a considerable dent in the number of lenders in operation.
According to figures inside the industry, many of the short-term lenders that did apply for authorisation to trade submitted their form without ticking the payday lending box, signaling their intent to withdraw from the sector.
New product, new Wonga?
Following a series of incidents last year which resulted in Wonga paying compensation of £2.6million to 45,000 recipients of fake legal letters; a charge of almost £20million to cover legal and administrative costs; and the requirement to write off £220million worth of debts, it will be interesting to see how the Wonga revival takes shape.