Wonga profits are slashed after bill from 'fake lawyers' scandal

Troubled payday lender Wonga today said profits had been cut in half after it was hit with a multi-million pound bill from the “fake lawyers” scandal.

The short-term lender said pre-tax profits slumped 53% last year to £39.7 million despite the number of high-cost loans it made soaring 15% to 4.6 million, as operating costs jumped 56% to £133.7 million.

Wonga said the profits drop was “driven by remediation costs related to historic debt collection and systems issues” — believed to refer to the cost of the legal and regulatory repair job needed after it was found to have sent fake legal letters to customers demanding payment. The Financial Conduct Authority subsequently demanded that Wonga pay £2.6 million in compensation.

Tim Weller, Wonga’s interim chief executive, said: “Investment in people, processes and our international businesses were key factors in the decline in Wonga’s 2013 profits.”

The company is reshaping its operations on the back of tougher consumer credit laws that came into force in April, which have hit all short-term credit providers.

Chairman Andy Haste — the former boss of insurer RSA brought in to repair Wonga’s reputation — admitted that profits would fall as it refocused.