The short-term lending options provided offered by companies, typically known as payday loans, are now under serious attack by the consumer groups together with the Citizens Advice Bureau. These groups draw on investigation into the industry presenting the trouble that several people have faced while repaying their payday loans. These investigation reports engrossed the interest of the Justin Welby, Archbishop of Canterbury, when he declared earlier this year that the Church of England aims to help credit unions in an effort to place loans companies out of their business.
Despite of these extensively reported troubles, the customers do not emerge to be withdrawn away from the offered products.
Wonga Company that was launched in 2007 reported the highest profits in the loan market. It suffered a loss about four years ago, but now made a profit of £84m in 2012 in spite of doubling its employs count in 2011. In year 2011, Wonga had a staff of about 131 members and by the end of next year the number grew to 325.
£1 billion cost lending industry revealed
After Wonga, the company with highest profits was MEM Consumer Finance. This US-owned company scored a profit of £38.7 million in 2012 on a turnover of whopping £123 million. The company lends up to £1,000 at an APR of 2160%.
Wage Day Advance was introduced by an American company called Speedy Cash Holdings in last February, since then it has raised its profits up to 32 times in last five years to £20 million with a turnover of £39.5 million. This signifies a 50 percent profit margin. The company lends payday loans to customers at 7069% APR.
In case of turnovers, the quickest growing company was a US owned Lending Stream. The company’s turnover augmented 42 times and rose from £700,000 to more than £32.7 million in just a period of three years. The company lends payday type loans in the UK as well through Zebit, lending up to £800 for a time period of one to several months at 1561.7% APR. It also provides a fixed-term 6 month loan as well through Lending Stream at of 4071.5% APR – an interest rate that lately rose from an APR of 3378.1%.
Despite its expansion Lending Stream is among few payday lending companies that is observed as not to be getting any profit. The latest accounts record of company showed a pretax loss of £4.3 million , but it was after paying more than £5.2 million administrative expenses and royalties to a related American company. The company has not received a profit since its inclusion in the UK that was about 5 years ago. So far it has stayed away for any corporation tax in Britain and has refused to make any comments in this regard.
CashEuroNet, is 2nd largest payday lending company, owned by giant Cash America International, that made more than £198 million in 2012 in UK, rising way above £15 million that it made in 2008. It works in the UK with QuickQuid, offering loans up to £1500 at 1734% APR. The company has not published any of its profit figures for UK.
Since 2012, the Office of Fair Trading is looking at the payday loans sector. In march a report was published that highlighted several concerns and the Office Fair Trading has sent a letter to about 50 payday loans companies confirming their ways of lending and advertising.