US-owned lenders have emerged as some of the biggest players in the UK payday loans market after the collapse of the former industry mainstay Wonga.
QuickQuid, WageDayAdvance and Sunny – owned by American-listed firms Enova, Curo and Elevate Credit, respectively – have made strides despite a clampdown on high-cost credit by Britain’s financial regulator and a recent surge in customer complaints.
Wonga was brought to its knees in August by a spike in complaints over excessive charges on historic loans that in some cases came with interest rates topping 5,000%.
The Financial Conduct Authority’s cap on payday loans charges came into force in 2015 and kept lenders from charging customers more in fees and interest than the amount borrowed. Some competitors shut shop as a result and Wonga fell into administration three years later.
It cleared the decks for US-owned rivals, whose third-quarter results offer a snapshot of their success. Wonga collapsed on 30 August, part-way through the three-month reporting period to the end of September.
Chicago-based Enova, which also operates Pounds to Pocket and On Stride, saw UK revenue jump 20% to $36.6m (£29m). Texas-headquartered Elevate Credit operates in the UK under the Sunny loans brand, and saw its own UK revenue jump 23% to $32m, as new customer loans for Sunny rose 45% to $26,671.
Curo, which is behind WageDayAdvance, saw UK revenue jump 27.1% to $13.5m, while underlying earnings nearly halved from $8.1m to $4.2m. It was helped by a “high percentage of new customers”.
But the New York Stock Exchange-listed firm has been hit by a surge in complaints and has been weighing whether to exit the UK market. Curo said costs rocketed 77.6% to $7.7m over the third quarter, when it paid $4m to cover the cost of resolving those complaints and compensating customers.
“We do not believe that, given the scale of our UK operations, we can sustain claims at this level and may not be able to continue viable UK business operations,” Curo’s earnings report said, adding that it had been in talks with the FCA and the Financial Ombudsman Service over its options.
Enova and Elevate have said a spike in complaints also posed a risk to their businesses.
But when contacted by the Guardian, Elevate insisted its UK brands “are different from Wonga”, adding that Sunny “has never charged fees, and imposed our own total cost cap even prior to the FCA rule introduced in 2015.”
Elevate believed many complaints against it were “without merit” and “reflect the use of abusive and deceptive tactics” by claims management companies, or CMCs, which pursue complaints on behalf of customers.
CMCs come under the regulation of the FCA in April and face a tighter regulatory regime.
Sara Williams, a debt campaigner and author of the Debt Camel blog, said that some CMCs failed basic checks and lodged complaints for customers who had never taken out loans from the respective payday lender. She hoped FCA regulation has a similar impact on CMC standards as it did on the payday lending industry, which resulted in “many of the worst lenders exiting the business.”
Williams said: “The CMCs are not the root cause of the crisis for payday lenders,” adding that the real issue had been irresponsible lending decisions and inadequate affordability checks. “If the lenders want to reduce the number of cases going to the ombudsman and the resulting ombudsman fees, then they should do a better job of settling customers complaints directly.”
Curo did not respond to requests to comment. Enova declined to comment.
