Mon, 29 Jun 2020 | ADMINISTRATION
UK payday lender Sunny Loans is close to administration, blaming the impact of coronavirus and “continued regulatory pressure”. The company, which is owned by Texas, USA-based Elevate Credit, offers loans of between £100-£2,500 at a representative APR of 1,267 per cent.
An Elevate Credit International spokesperson said: “Unfortunately, due to the ongoing economic uncertainty as a result of coronavirus and the continued regulatory pressure on the business, we have had to take the difficult decision to give notice to appoint administrators.”
In Sunny Loans’ last accounts, filed to the year ending December 2018, the company reported pre-tax profit of £78,244, down from £5.7 million in the year prior. This decrease was in spite of revenue increasing to £92 million from £80 million and the company claiming to command over a fifth of the market.
The company also reported handling over 104,000 new customers during 2018 and said that this was partly to blame for the fall in profit. It also cited a higher proportion of bad debt, the cost of investment in new IT and compensation claims. Sunny also warned of the “significant costs“ to resolve complaints from the Consumer Finance Association with the Financial Ombudsman.
Payday lenders have come under increasing pressure over recent years due to price caps and more stringent affordability checks. There has also been a huge increase in complaints made through claims management companies (CMCs).
The surge in compensation claims that has impacted the sector largely comes from customers who claim they were mis-sold loans that they could not afford. Wonga collapsed in 2018, followed by lenders including QuickQuid and PiggyBank in 2019.
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