Business 3 September 2013 Wonga announces record profits – but should they have them? Carl Packman asks if we can be comfortable living in a country where Wonga makes millions. Print HTML Wonga – the controversial payday lender – has today announced record profits of £63m for 2012, or roughly £1m per week. More evidence that as financial hardship tears through many families in the UK, selling expensive loans to hard-up people is a growth industry. Last year PwC noted in a report that between 2008 and 2010 mainstream banks lent around 50 per cent of the total stock of consumer credit. This represented a drastic cut back, despite the fact that wages were declining in this period and the small occurrence of a financial collapse. These years were not good for borrowers on two counts: firstly it was harder to obtain credit, and second more people were unable to see their wages out to the end of the month. While Bank of England data reveals that consumer credit has risen in recent times by 3.5 per cent, it does not follow that mainstream banks have returned to providing for local communities again. Another report by CityWire shows that some 52 per cent of the total stock of credit lent comes from "other" financial institutions – the main one being payday lenders. It is no wonder Wonga have recorded massive profits – we live in the Wonga age. But is it their fault? Certainly we cannot blame the company for bank failings, the rising cost of living, and declining wages, things over which they can have no effect. But they do control the way in which they sell their loans. Reports abound of Wonga selling loans to people whose financial situation means that the last thing they need is high cost credit. I wrote in these pages about Susan, the unemployed nurse who was granted several loans by the company to pay for bills and food. At no point was she signposted more affordable alternatives or given debt advice by the payday lender. Wonga themselves point out that they use a very sophisticated algorithm to determine who it is reasonable to lend to. But it seems there are some deep flaws with this system. This is Money earlier this year reported having spoke to 50 people who had had loans taken out of their accounts – despite those people not having applied for loans themselves. To illustrate how much of a problem this could be, aside from potentially losing money and the hassle, This is Money spoke to Adrian Anderson, director of mortgage broker Anderson Harris, who pointed out that: “if [a] loan is taken out fraudulently and subsequently not repaid, this will be seen as a black mark on your credit file and could affect your ability to get a mortgage.” The image that Wonga present of themselves is different to that of independent pollsters. The company boast that they have a great customer satisfaction record, however YouGov recently surveyed some of its borrowers and found that they scored worse than Ryanair. Interviewing at random 89 borrowers, 24 per cent were satisfied, 41 per cent dissatisfied, and 35 per cent neutral. Wonga are, indeed, a consequence of the deleterious financial situation in the UK, rather than a cause of it. No one would deny this. But their loans don't help the personal finances of many vulnerable today. They say they turn many people away. Perhaps true, but should they warn more people of the dangers of using their product? I say yes. In addition to financial health warnings being put on their adverts, I'd like to see Wonga advertising the services of ethical lenders such as credit unions – who are better placed to serve those financially vulnerable people in hock to them. So now Wonga have made all that money, should they keep it? Far be it from me to tell a private company what to do with its money, but maybe they could offer some to the Church of England who, along with the archbishop of Canterbury Justin Welby, are busy making the case and building up the presence of credit unions. Though really I would prefer to see the company make less money in the future – after all, nobody should be comfortable with the idea of firms profiting from poverty. It may be legal, but is it right? › Ethiopia and Kenya help dismember Somalia A payday lender in Brixton. Photograph: Getty Images Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies. Subscribe More Related articles The changing world of work Outlook for 2016 Is Kezia Dugdale's tax rise the beginning of an honest debate about tax?