Sky News can reveal that Wonga was on Monday granted full authorisation by the Financial Conduct Authority (FCA), just weeks before an interim permission to operate was due to expire.
The granting of a licence comes as Wonga, the UK’s biggest payday lender, seeks to diversify its business away from the short-term lending model that made it a lightning rod for political and public anger over the sector’s rapid growth.
Neither the FCA nor Wonga had planned to make public statements about the regulator’s decision to authorise the company, but in response to an enquiry from Sky News, Andy Haste, Wonga’s chairman, said:
“FCA authorisation is an important milestone for Wonga as we continue to build a responsible business with a long-term future, putting customers and good governance at the heart of everything we do.”
“We have made progress against our commitment to deliver change and the FCA’s examination of the business has been rigorous and thorough.
“We support the work of the FCA and we will continue to work with them openly and constructively as a responsible participant in the financial services sector.”
The authorisation process has been a requirement since the City watchdog assumed responsibility for regulating thousands of consumer credit providers in 2014.
Wonga began trialling a 90-day loan late last year which allows customers greater flexibility to spread repayments over a longer period.
The product, which is being piloted for several months, was the first extension of the Wonga brand to be unveiled since the company announced that it had made a loss of more than £37m in 2014.
Its slump into the red followed a string of regulatory settlements, customer redress and restructuring costs triggered by the loss of more than 300 jobs.
Last year, it was forced by the FCA to pay more than £2.5m in compensation to 45,000 customers who were sent letters purporting to be from law firms but which in fact did not exist.
A near-£20m charge to cover the cost of compensation, as well as legal and administrative costs related to the issue, was taken in its annual results for 2014.
Once tipped to float in New York with a bumper valuation, Wonga faces an arduous return to profitability as it contends with the imposition of a limit on the amount that payday lenders can charge in interest.
The regulator has estimated that the vast majority of the roughly 400 payday lenders operating in Britain will go out of business following the introduction of a price cap on loan and repayment charges.
A YouGov poll published last week ranked Wonga second on the list of most-improved brands, behind the Co-operative Bank.
Wonga has overhauled its advertising in an attempt to reposition itself as a responsible lender, and removed its logo from the replica shirts of Newcastle United, the Premier League football team it sponsors.
A source close to the company said it had made significant efforts to improve its transparency and governance.
As published by Sky-News