Wonga Chairman Errol Damelin Stepping Down Ahead of FCA Payday Regulation
Wonga Chairman Errol Damelin Stepping Down Ahead of FCA Payday RegulationGetty

Wonga's chairman Errol Damelin is allegedly looking to step down from the payday lending firm ahead of the controversial sector being regulated for the first time by the Financial Conduct Authority.

According to the Guardian newspaper, Damelin is set to announce his departure from the role within the next two months, although he will retain a 5% share in the payday loans company, worth an estimated £50m (€60.5m, $83.2m).

The report says that Damelin has "grown weary of having to constantly defend the company from political attacks and public outcry" and that the FCA's soon-to-be hands on approach with the sector will make his position more difficult.

"We will become FCA regulated from Tuesday, the business will be regulated like a mainstream financial services business. With additional investigations, the role of chairman has changed," said a source to the Guardian.

"We are looking for a financial services heavyweight."

The FCA will take over responsibility of the consumer credit industry, including payday loans, from the OFT on 1 April 2014.

The UK payday lending sector is worth £2bn in the UK. Its value has doubled since 2008/2009.

Current figures show that this corresponds to between 7.4 and 8.2 million new loans.

Despite these loans being described as one-off short term loans, costing an average £25 per £100 for 30 days, up to half of payday lenders' revenue comes from loans that are rolled over or refinanced.

Interest rates on the short term loans can reach highly inflated levels.

Wonga is one of the UK's largest payday loan companies and has recently bumped up its representative APR of 5,853% on its website.

Wonga was not immediately available for comment at the time of publication.