Wonga's profits soar - as do bad debts in the UK
Errol Damelin says Wonga is 'not pushing people over the edge', despite increase in loan defaults
THE chief executive of Wonga has defended his business as the firm revealed that more than 1000 customers a week default on their payday loans.
The Times reports that bad debts mushroomed from £66.7m to £126.1m between 2011 and 2012, due to a large expansion of the Wonga loan book. The company, whose interest rates can reach up to 5,853 per cent, saw pre-tax profits soar to £84.5m, up 35 per cent, during the period.
During 2012 Wonga handed out nearly four million loans, worth a total of £1.2bn, to one million customers in Britain. According to The Guardian, this matches the amount Britain's biggest building society, Nationwide, granted during the year in personal loans.
Labour MP Stella Creasy said: "The fact that Wonga is able to make more than £1 million a week in an industry which has widespread malpractices should be of great concern to all of us."
However, Wonga boss Errol Damelin said the amounts provided by the payday loan company were too small to cause real financial difficulty: "It's very unlikely that a £200 loan or a £400 loan is what gets people into a financial mess."
Damelin, who received a 19 per cent pay rise last year to £754,000, said "if it [default] happens at the edges, we deal with it in as humane a way as possible."
Wonga is thought to be Britain's largest payday lender and has been accused by MPs, the Church of England and other regulators of irresponsible lending, targeting vulnerable people and charging sky-high interest rates.
However, Damelin said that recent market research showed that most users would recommend Wonga to friends and relatives. He also insisted that the typical user was young and technologically savvy - "part of the Facebook generation" - rather than desperate families on the breadline.
Mathew Lawrence, of the Institute for Public Policy Research, said that the latest results showed that "Wonga-bashing isn't working". Archbishop of Canterbury Justin Welby has promised to "compete payday lenders out of existence" with church-based credit unions. ·