; 10 years ago 2006 founder errol damelin headquarters london united kingdom products short term credit website wonga.com wonga.com a trading name of wdfc uk limited is a british payday loan company offering short term high cost credit . 1 the interest charged by the lender which can equate to an annual percentage rate apr of 1509 % . 2 wonga have said that they believe that apr is a poor measure of the true cost of short term loans . as of april 2016 a loan of 100 over seventeen days wonga s average loan term required 113.60 to repay . 3 wonga is a slang term of romany origin for money used in some parts of britain since the 1980s . 4 the firm operates in the uk south africa spain germany 5 and poland . the company exited the canadian market on may 6 2016 . the company invented fully automated risk processing technology 6 to provide short term unsecured personal loans online including via tablet and mobile app . the service was launched in october 2007 . 7 the firm was the first to provide an instant lending application on the iphone . 8 consumer credit suppliers were regulated in the uk by the office of fair trading oft until april 2014 and then by the new financial conduct authority fca . the firm s lending practices have been controversial and they have been criticised in parliament and by the regulators media and religious sources . in 2014 the firm was ordered by the fca to pay compensation of 2.6 m to borrowers for bad debt collection practices including in 2010 sending and charging for letters purporting to be from law firms which did not in fact exist threatening legal action . 9 the newspaper the guardian quoted the head of the law society as saying that wonga s activity which he qualified as dishonest could amount to blackmail deception and other breaches of the law . a formal police investigation for fraud was being considered as of 27 june 2014 update . 10 on 30 september 2014 wonga announced that its profits for the year to the end of december 2013 had fallen by 53 % to 39.7 million . the company blamed remediation costs compensation paid to customers which in total cost the company 18.8 m. wonga also said it expects to be smaller and less profitable in future in part due to new controls set by the regulator the financial conduct authority fca . since july 2014 all payday loan companies have had to conform to new rules which limit roll overs of loans and force them to increase affordability checks . from january 2015 they were also to have their charges capped . 11 on 2 october 2014 wonga agreed to write off the debts thought to total 220m of 330 000 customers who were in arrears of 30 days or more . this was a direct consequence of discussions with the financial conduct authority fca . 12 13 wonga saw losses more than double in 2015 as tougher regulation of the payday loan sector led to a sharp fall in the number of loans taken out by uk consumers ; the business reported a pre tax loss of 80.2 m for the year up from 38.1 m the year before . after tax the company lost 76.5 m versus 43.6 m in 2014 . the uk remained a core part of the business as of 2013 customers in the uk accounted for 3.8 m of the 4m loans it granted . the drop in revenues was driven primarily by a new price cap and stricter criteria set by uk regulators . 14 contents 1 development and funding 2 corporate structure and alleged tax avoidance 3 ownership 4 customer profile 5 apr and the cost of a wonga loan 6 defaults and renewal of loans 7 criticism 7.1 debt collection practices 7.2 church of england 7.3 politicians 8 sponsorship and public relations 9 awards 10 ceos 11 see also 12 references 13 external links development and funding edit wonga was founded by errol damelin chief executive officer in october 2006 and he linked up with software engineer jonty hurwitz in january 2007 . 15 both damelin and hurwitz had previous internet start up experience ; neither had any experience of retail banking . 16 when the company first started looking for funding potential investors saw the short term small loans business as an unprofitable risky backwater . 17 after being denied funding by uk banks wonga secured venture capital through balderton capital . 18 the first place of business was in a shared office space in st. john s wood london . 19 after a year of software development a beta website was launched in 2007 . 20 in interviews damelin has said that the goal was to disrupt the short term credit industry by providing transparency exact control of amount and payment date immediate access to funds and no faxing or emailing documents . 17 the business model of lending only to those who could pay back reliably as opposed to the much wider catchment practice of payday loans required an algorithm that could fully determine risk in an automated manner something they had difficulty developing in the early stages . to get funds directly to customer s bank accounts as quickly as possible co operation from leading banks was required . banks were reportedly dismissive of wonga s plan saying they would not be totally satisfied with customer identity without physical documentation . 17 within five minutes of launch the first loan application was processed and within a week the first loan default occurred . 17 the subsequent months of operation showed increased demand but traditional methods of credit risk assessment proved inadequate citation needed and the company experienced default rates of around 50 % . 6 the company used this period to gather data on customer behaviour and began developing their own proprietary risk technology . citation needed the full market launch of wonga.com was july 2008 and 100 000 loans were reached by june 2009 . 21 through the experience of processing these loans the company developed technologies which began to dramatically reduce the percentage of defaults . citation needed in july 2009 wonga raised a further 13.9 m of funding in a round b led by accel partners greylock partners and dawn capital 22 which improved the technology citation needed and the launch in december 2009 of the first end to end iphone credit app . 8 in 2009 the company was already profitable and default rates were below 10 % less than the average for credit cards . 22 a third round of funding was completed in 2011 for 73m led by oak investment partners including additional investors meritech capital partners and the wellcome trust . 23 by the end of 2011 wonga s technology could reliably reject two thirds of applications and predict to 93 % accuracy the ability of a customer to repay a loan . 24 in may 2012 they opened a business in south africa offering consumer loans . 25 26 the daily telegraph reported in november 2012 that wonga were also testing their technology in canada . 27 corporate structure and alleged tax avoidance edit wonga is a trading name of wdfc uk limited . also incorporated is wonga.com limited and wonga group limited . all are companies incorporated in the united kingdom but not quoted on the stock market . also associated with the group is a swiss registered firm wdfc sa formerly known as wonga international ag which processes credit applications on behalf of wonga and owns the trademark to the wonga name . citation needed by 2011 wonga had refined its business model to such an extent that it started to make significant profits and in september 2012 it reported profits of 45.8 m for 2011 from revenue of 185m up from a profit of 12.4 m in 2010 . 28 the involvement of the swiss company and the transfer of the trademark to it in 2012 have been seen by corporate watch as part of a scheme by the firm designed to avoid tax . according to accountancy age in 2012 a net amount of 35 million was paid to wdfc sa the profit on which will only be taxed in switzerland . 29 30 several wonga executives are now believed to be based in geneva in connection with the business of wdfc sa . 31 in 2013 an irish subsidiary of wonga patented user authentication software telling corporate watch that it is common practice for international groups to consolidate their ip holdings in a location where the substantial activity relating to the ip is performed . richard murphy from tax research uk commented that the transfer of key business processes especially those that are technology based and that can be protected by patents and copyrights is a classic way in which companies try to move their profits between countries . 30 32 ownership edit over 180 million shares of the company are owned by venture capital firms around 77.1 % . 33 the balance of the company is owned by staff board members and founders with errol damelin owning 26.5 m shares through castle bridge ventures an offshore trust based in the british virgin islands while jonty hurwitz owns 12.6 m shares around 5.5 % through a bvi company . 34 verification needed damelin resigned as chief executive in november 2013 to become part time chairman and non executive director . he resigned entirely as a director in june 2014 . 35 hurwitz resigned from the company in november 2011 and left the board of wonga in november 2013 . 35 customer profile edit wonga claims that its customers are tech savvy young professionals who previously used the banks to borrow money . 36 it accepts that its apr is not cheap but claims that its typical customer is on a mid level salary and is temporarily short of cash because of an unexpected bill for example to buy a new central heating boiler or tickets to a music festival . 37 dr gathergood of the university of nottingham described payday loan users as falling into two groups those who have had a financial shock but can repay the money and those who were unable to control their expenditure though he said lenders preferentially associated their clients with the first group . 38 the committee also looked at credit unions . 38 mark lyonette of association of british credit unions said that although credit unions now provided 90 million loans in the united states they were not able to match the sophisticated automation and credit scoring behind the scenes of the high tech payday lending wonga model though he welcomed the possibility of using post offices as a vehicle to expand the credit union market in the uk . 38 wonga has said that most applicants are not credit worthy enough to obtain a loan from the firm and it only lends to those with a good credit record . some commentators however have warned that taking a loan from a payday lender can damage the customer s credit record and their ability to obtain a mortgage even where the loan was repaid years ago . ray boulger of john charcol for instance told bbc newsnight that our experience is that mortgage lenders will often turn down requests for people who have had a payday loan ... 39 and robert sinclair chief executive of the association of mortgage intermediaries said from a consumer perspective anybody who takes out a payday loan is clearly showing some financial distress and existing lenders will think these consumers may be maxed out . 40 apr and the cost of a wonga loan edit screenshot from wonga.com showing the cost of borrowing 100 for 30 days as at 17 november 2013