Payday loans giant Wonga saw profits soar 36 per cent rise in 2012 after it lent £1.2billion to more than 1million customers.
The controversial lender, which has faced criticism from the head of the Church of England over its high interest charges, provides short-term loans to cash-strapped Britons, many of whom have had difficulty obtaining credit from mainstream banks.
Wonga said it made post-tax profit of £62.5million last year - or more than £1million a week - with revenues rising by 67 per cent to £309million, and highlighted that it paid more than £21million in corporation tax in the UK last year.
Promotion: Data shows that payday lenders like
Wonga continued their tireless self-promotion even when they were under
scrutiny by the Office of Fair Trading.
Payday lenders have recently pumped millions of extra funds into advertising campaigns in a bid to win more customers, flying in the face of criticism from regulators.
Leading market research firm Nielsen has revealed that the amount spent on advertising by Britain’s top five payday lending brands rose 26 per cent to £36.3million in the 12 months to June compared with the period to June 2012.
Meanwhile, the Office of Fair Trading has ordered a full inquiry by the Competition Commission into the sector - a move that caused 20 out of the 50 lenders facing the probe to quit the market.
He said: 'This is not about people on breadlines being desperate and us being a lender of last resort. We reject two-thirds of applications.'
Instead he said the industry has been tarred by behaviour of other high-interest lenders.
'There's a lot wrong in how other parts of the industry operates,' he said.
And Mr Damelin insisted the company's profit margins are 'not outrageous in any way to us'.
He added: 'Our customers are telling us that we provide very good value for money.'
'We provide a useful service': Errol Damelin, boss and co-founder of Wonga.
Critic: Archbishop Justin Welby has branded loan firm charges as 'usury'.
The figures show that in the three months to June, at the height of the OFT’s investigation, spending rose 24 per cent on the same period in 2012.
The newly formed Financial Conduct Authority is also investigating the industry. It is concerned that the promise of easy money is blinding hard-up consumers to the risks of short-term, high interest loans. Customers that fail to pay back loans on time can quickly find debts spiral out of control.
The Archbishop of Canterbury has described the charges as 'usury' – where the cost of the loans, conditions of repayment and potential risks are immoral or unethical.
In July he declared that the Church would lend support to credit unions as a way of creating better and more responsible competition to the payday lenders.
The Most Rev Justin Welby reported having a 'very good conversation' with Mr Damelin.
'I've met the head of Wonga and we had a very good conversation and I said to him quite bluntly "we're not in the business of trying to legislate you out of existence, we're trying to compete you out of existence",' the straight-talking Archbishop said.
'He's a businessman, he took that well.'
His statement caused immediate embarrassment when it emerged that the Church of England itself had indirectly invested in Wonga.
Claims that competition from credit unions will drive Wonga and others out of existence may also prove optimistic in the face of the payday lenders’ advertising blitz.
The sum spent on advertising by the big five
payday brands, including Wonga, which is the biggest, is comparable with
that spent by one of Britain's leading high street.
A study last week claimed that the majority of people who are turned down for cards and loans by mainstream lenders are likely to turn to payday loans as they are unaware of alternative forms of credit.
The survey by Amigo Loans - which provides so-called guarantor loans - estimated that just under a quarter of UK adults have been turned away from their banks for loans, mortgages and credit cards.
Of these, four-fifths feel forced to turn to alternative lenders who charge higher rates for credit.
The sum spent on advertising by the big five payday brands is comparable with that spent by one of Britain’s leading high street banks.
Nielsen did not release individual figures for each advertiser citing commercial sensitivity, but aside from Wonga the others in its list of top five payday brands are thought to be Payday UK, Payday Express, QuickQuid and Pounds to Pocket.
Stella Creasy, the Labour MP who has criticised Wonga in the past, said: 'We have got to remember that Wonga's mega-profits come at a time when the entire payday lending industry has been referred to the Competition Commission by the Office for Fair Trading because of concerns about exploitative practices within that industry.
'So the fact that Wonga is able to make more than £1million a week in an industry which has widespread malpractices should be of great concern to all of us in Britain.
'What that says about families who are struggling financially, what it says about the kind of regulation we currently have in the UK and the things we need to do to make sure people in Britain can borrow affordably,
'Wonga might be celebrating today, I'm very, very concerned about what this might mean for people in my community and across the country who are paying the price for their profits.'
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