One of the most well-known payday loan companies, Wonga, is understood to be in financial trouble following a surge in customer compensation claims relating to loans taken out before 2014.

The situation is likely to result in increased regulatory pressure on the sector which includes several listed companies.

Wonga’s problems are ‘very company specific’, relating to historically mis-sold payday loans according to Gary Greenwood, analyst at broker Shore Capital.

Doorstep lender Provident Financial (PFG) had its own annus horribilis last year when changes to its home credit business and other issues saw two thirds of its value wiped off in a day last August.

Provident has already been under investigation by the Financial Conduct Authority, with the regulator scrutinising if the company’s Moneybarn division was giving finance to those unable to afford it.

The FCA also fined the company nearly £2m due to its credit card division Vanquis failing to explain the full cost of a repayment option plan.

Despite these negative factors, subprime lending is a growing sector.

Recently-floated guarantor loan company Amigo (AMGO) releases its maiden results as a listed company on 30 August. Non-Standard Finance (NSF) earlier this month reported a 62% rise in revenue to £75m for the six months to 30 June. (DS)

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