Controversial lender Wonga has been ousted from its place as Britain’s biggest payday loan firm by a fast-growing American rival.
Enova International – whose brands in the UK include QuickQuid and Pounds to Pocket – told its American investors last week that it has seized the top spot from Wonga partly by targeting middle-class families with its quick-fix loans.
Wonga became infamous as the largest payday lender in the UK but, along with many others, was hit by a clampdown on the industry by regulators amid fury from politicians who accused the sector of exploiting hard-up families with its expensive loans.
But Enova claimed last week to have ridden out the regulatory clampdown, helped by the launch of new products such as On Stride Financial, which is aimed at the struggling middle-class families market.
Enova chief executive David Fisher told investors in the US last week: ‘We are successfully growing our business again following the regulatory changes.
‘We’re now the number one [payday] lender in the UK, having taken market share from our competitors since the new rules became effective. In addition, our UK business is profitable.’
Last year, despite increased scrutiny by the Financial Conduct Authority, the company’s UK revenues were around £100million.
By comparison, Wonga turnover last year fell to just £77.3million. Enova said its own business is now booming with lending so far rising 23 per cent in the first six months of the company’s financial year – or 33 per cent when the recent fluctuations in sterling compared to the dollar are stripped out of calculations.
Profit on its UK operation is already £11.4million ($15million) in the first six months of the year.
As recently as November Enova was forced to stomach a £1.7million refund to 4,000 of its customers after admitting it had lent them more than they could repay. More than half of those customers had outstanding balances written off.
The charge followed sustained criticism of the payday lending industry, including from Archbishop of Canterbury Justin Welby, who described the industry as ‘morally wrong’ and said it engaged in ‘usury’.
The Consumer Credit Sourcebook, a detailed manual published in February 2014 by financial regulators, imposed a raft of changes on the payday lending market.
Those included demands for more rigorous affordability assessments on borrowers, limiting the number of times a loan and interest could be ‘rolled over’ into a larger debt, imposing restrictions on misleading adverts and restricting how firms can access the bank accounts of their borrowers.
Other controls on payday firms include the appointment of a ‘skilled person’ to double check the lender’s systems and affordability checks.
The catalogue of changes followed years of campaigning by The Mail on Sunday which highlighted practices at dozens of firms and included a dossier of complaints which were handed in to the authorities in November 2012.
With the regulatory crackdown now in place, Enova is now still looking forward to significant growth. The company told its investors the high-cost, unsecured credit market in the UK is worth an estimated $9billion (£6.8billion).
It also estimates that there are seven million UK consumers hungry for more loans – who are underserved or cannot get access to credit.
By NEIL CRAVEN, FINANCIAL MAIL ON SUNDAY