Wonga Group Ltd., the U.K. payday lender, is planning to offer longer-term loans, potentially more than quadrupling its market as it seeks to adapt to tougher regulations and return to profit.
Later this year, the company will start offering new products that could be sold using a different brand name, Tara Kneafsey, who heads the firm’s U.K. business, told reporters in London. The changes come after British regulators stepped up scrutiny of the payday lending market, strengthened rules to protect consumers and fined Wonga for misconduct.
“We’re trying to fix what we’ve done in the past,” Kneafsey said. Wonga is starting to “position ourselves to move to the more responsible lending space,” she said.
Wonga is cutting a third of its workforce to help it adapt to new rules that regulators say may drive some payday lenders out of business. It’s also working to recover from a 37.3 million-pound ($58.5 million) pretax loss for 2014. Kneafsey said the company won’t make a profit this year, and will “come out of the other side” in 2016.
The firm’s previous model of making small, short-term loans had targeted about 3 million Britons, and the longer-term products expand the potential customer base by an additional 10 million people, she said. The company now has about 600,000 customers.
Wonga hasn’t decided what longer-term products to sell, though it may offer lines of credit or installment loans, where repayments are made over several months, Kneafsey said
Wonga was fined 2.6 million pounds in June by the Financial Conduct Authority for writing letters under the names of fictitious law firms that threatened to sue customers behind on their payments. The company also wrote off 220 million pounds in loans, a person with knowledge of the matter said in October.
Some payday lenders may leave the business, Martin Wheatley, the FCA’s chief executive officer, has said. Wonga, CashEuroNet UK and Dollar Financial U.K. Ltd. are the nation’s three largest payday lenders, according to Bloomberg Intelligence.
Wonga is working to get approval from the FCA for the new products in a process that started in February and could take as much as a year to complete, Kneafsey said.