Hundreds of payday lenders will be wiped out by tougher rules designed to protect customers, experts have predicted. It comes as Wonga, the UK’s biggest payday loans firm, today revealed it racked up a £37.3million loss last year following a significant reduction in UK consumer lending while it attempts to clean up its tarnished image. Revenues declined to £217.2million in the period, down by almost £100million. Wonga's executive chairman Andy Haste said: 'We know it will take time to repair our reputation and gain an accepted place in the financial services industry, but we're determined to deliver on our plans and serve our customers in the right way.' Hundreds of payday lenders, such as Wonga, will be wiped out by tougher rules designed to protect customers, experts have predicted . The City watchdog has forecast that just three or four payday lenders out of 400 will be left standing following the introduction of the rules in January. They include a daily interest cap of 0.8 per cent and stricter affordability checks to ensure customers can repay loans. The true picture should become clearer later this year, as the Financial Conduct Authority (FCA) attempts to weed out dodgy firms. Payday lenders have all had to apply for a license to trade and will learn in the coming months whether they have been successful. Robin Savage, an analyst from investment bank Canaccord Genuity described some of the tactics used by payday lenders – such as extending loan terms and adding interest to customers who cannot afford to repay - as ‘evil’. He said: ‘If firms can’t do proper checks and find customers that can repay them then they do not deserve to survive.’ Wonga, has become a lightning rod for public fury over payday lenders. Last year it took a £35million hit from writing off debts worth £220million owed by more than 300,000 customers. It was also ordered to pay £2.6million in compensation after sending fake legal letters between 2008 and 2010 to 45,000 customers who had fallen behind on their repayments. The City watchdog has forecast that just three or four payday lenders out of 400 will be left standing following the introduction of the rules in January (file picture) A charge of almost £20million will be incurred by the firm to cover compensation as well as legal and administrative costs. Wonga has been accused of trying to lure youngsters to take out payday loans with its controversial puppet adverts. Its new chairman Andy Haste – brought in to clean up the business – has ditched the adverts and admitted that it will be smaller and less profitable under the new regime. The cap on the cost of loans has reduced Wonga’s annual interest rate from 5,853per cent to 1,509 per cent since the changes were enforced in January. This will not be reflected in the figures released today, which cover last year. But the losses will include redundancy pay-outs, as Wonga is halving its UK workforce, with the loss of 325 jobs. Today’s figures showed a slump in customers, after Wonga stricter affordability checks in October – ahead of changes enforced by the FCA in January.
Hundreds of payday lenders will be wiped out by tougher rules, say experts.
It comes as Wonga today revealed a £37.3million loss for last year.
City watchdog says just three or four lenders out of 400 will remain.