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Profits soar at payday lender Wonga
Payday lender Wonga has seen profits surge after approving nearly 2.5 million short-term loans in its last financial year.
The company has faced accusations that it targets the financially vulnerable with an annual percentage rate as high as 4,000% but argues it is helping meet demand for short-term loans from people shunned by high street banks.
The number of loans provided jumped by 296% in 2011, helping revenues rise 225% to £184.7 million and net income lift 269% to £45.8 million.
Wonga credits its performance on technology enabling it to make real-time lending decisions and says it still rejects the majority of first-time loan applicants. Its average loan is about £160, with interest of about 1% a day.
The latest results come amid scrutiny of the industry by the Office of Fair Trading (OFT) amid claims that some firms target people unsuitable for credit and roll over loans so that the charges escalate and they become unaffordable.
Co-founder and chief executive Errol Damelin said Wonga's success was based on record levels of customer satisfaction and a 10-fold increase in the volume of loans taken out by mobile phone. A new iPhone app is being downloaded by nearly a thousand people a day.
Mr Damelin said: "We delivered another year of growth in 2011 by continuing to use our technology to meet people's cash flow needs in increasingly tailored ways. Enabling people to borrow on their terms, with no hidden catches, has also seen us continue to record super-high customer satisfaction ratings with word of mouth still helping to drive our growth."
He said Wonga has now offered its short-term loans to more than one million people since its launch in 2007, with six million loans in total.
Wonga was recently criticised by the OFT for letters and emails that without appropriate justification suggested that some customers may have committed fraud although Wonga said it planned to launch an appeal against the ruling.
Earlier this year, the group branched out by offering loans for businesses of between £3,000 and £10,000 within 15 minutes. There have also been reports that the London-based company is considering a US stock market flotation that could value the business at more than £1 billion.