The payday lender Wonga unveils profits of £1m a week as the number of customers willing to pay its high interest rates rises to more than a million.
The company, which charges households annual interest rates of more than 5,800 per cent, said profits after tax rose by 36 per cent to £62.5m in 2012.
Lending increased by 68 per cent in the year to £1.2bn and customer numbers rose by 61 per cent to more than a million, reflecting the squeeze on household finances over recent years.
The Archbishop of Canterbury, Justin Welby, has said he wants the Church of England to drive Wonga out of business by backing credit unions.
Wonga typically lends sums of about £200-400 to consumers, repaid over a few weeks. It has also started offering loans of up to £30,000 to small businesses, repayable over a year.
Gillian Guy, chief executive of charity Citizens Advice, said: “Payday lenders’ profits come directly from the pockets of consumers, many of whom turn to them out of desperation rather than choice.
“The payday loans industry must focus on boosting customer welfare, rather than boosting profits at the expense of hard-pressed householders who struggle to pay back unaffordable loans.”
Trade union Unite branded it “vulture capitalism”, saying the sector “preys on the financially vulnerable”.
Payday loans: the key questions
But Errol Damelin, founder and chief executive of the company, said it operated in an “upfront and transparent” way and rejected two-thirds of loan applications.
Wonga says it earns an average profit of £15 per loan, or 5p of profit on every £1 it lends.
Mr Damelin said: “This is not about people on breadlines being desperate and us being a lender of last resort.”
He said Wonga’s customers tend to be digital-savvy, young, single and employed, adding: “Our customers are telling us that we provide very good value for money.”
In June, the Office of Fair Trading (OFT) referred the entire payday lending industry, worth £2bn, to the Competition Commission after uncovering “deep-rooted” problems. The OFT suspects that features of the market “prevent, restrict or distort competition”.
Stella Creasy, a Labour MP who has criticised Wonga in the past, said: “The fact that Wonga is able to make more than £1m a week in an industry which has widespread malpractices should be of great concern to all of us in Britain.”
The company says the annual percentage rate (APR) it charges does not represent its true cost to consumers as loans are repaid much sooner than a year and interest is frozen when customers are 60 days in arrears.
Mr Damelin said: “It’s very unlikely that a £400 loan is what gets somebody into a financial mess. We are doing it with total integrity.”