Wonga etc - is this usury?

SimonAH

It's always been much more expensive to be poor than rich, but these 'payday loan' companies must surely get regulated? The crippling levels of interest are driving the poorest into worse and worse trouble.

Surely this should be regulated more stringently? Or at the very least we need a national campaign to force them to voluntarily reduce the interest rates that they charge?

In the old days this would be known as loan sharking for crying out loud....

bails87

Is this usury what?

rick_chasey

SimonAH wrote:

It's always been much more expensive to be poor than rich, but these 'payday loan' companies must surely get regulated? The crippling levels of interest are driving the poorest into worse and worse trouble.

Surely this should be regulated more stringently? Or at the very least we need a national campaign to force them to voluntarily reduce the interest rates that they charge?

In the old days this would be known as loan sharking for crying out loud....

I believe this was up for discussion in parliament but it was voted down by the Tories and Lib Dems.

I also believe, though I could be mistaken, the owner* of Wonga is a very large doner to the Tories, and is pretty influential in the party.


*turns out he's not an owner - he's a venture capitalist with a big stake in Wonga - Beecroft.

rjsterry

Rick Chasey wrote:

SimonAH wrote:

It's always been much more expensive to be poor than rich, but these 'payday loan' companies must surely get regulated? The crippling levels of interest are driving the poorest into worse and worse trouble.

Surely this should be regulated more stringently? Or at the very least we need a national campaign to force them to voluntarily reduce the interest rates that they charge?

In the old days this would be known as loan sharking for crying out loud....

I believe this was up for discussion in parliament but it was voted down by the Tories and Lib Dems.

I also believe, though I could be mistaken, the owner of Wonga is a very large doner to the Tories, and is pretty influential in the party.

teeheeheeheeheeheehee.

SimonAH

:shock: Wonga is owned by a rich kebab????

rick_chasey

il_principe

Rick Chasey wrote:

On the subject of DOH!

Rick Chasey wrote:

I was going to go round some other shops to try a few others but the whether was horrific and it was late in the day anyway.

doh...

rick_chasey

I'm going to go cry in a dark corner.

sketchley

how much cash do you want? £1
how long do you want it for? 1 Days

Borrowing £1 + Interest & fees* £5.56 = Total to repay £6.56

Anyone care to work out the APR on that.

dhope

Sketchley wrote:

how much cash do you want? £1
how long do you want it for? 1 Days

Borrowing £1 + Interest & fees* £5.56 = Total to repay £6.56

Anyone care to work out the APR on that.

Not that I condone their business but that's a harsh example.

DavidBelcher

rjsterry wrote:

Rick Chasey wrote:

SimonAH wrote:

It's always been much more expensive to be poor than rich, but these 'payday loan' companies must surely get regulated? The crippling levels of interest are driving the poorest into worse and worse trouble.

Surely this should be regulated more stringently? Or at the very least we need a national campaign to force them to voluntarily reduce the interest rates that they charge?

In the old days this would be known as loan sharking for crying out loud....

I believe this was up for discussion in parliament but it was voted down by the Tories and Lib Dems.

I also believe, though I could be mistaken, the owner of Wonga is a very large doner to the Tories, and is pretty influential in the party.

teeheeheeheeheeheehee.

That won't last 5 minutes with Eric Pickles around.

David

DavidBelcher

SimonAH wrote:

It's always been much more expensive to be poor than rich, but these 'payday loan' companies must surely get regulated? The crippling levels of interest are driving the poorest into worse and worse trouble.

Surely this should be regulated more stringently? Or at the very least we need a national campaign to force them to voluntarily reduce the interest rates that they charge?

In the old days this would be known as loan sharking for crying out loud....

I saw a poster for a pay day loan firm whilst sat on a train a week or two back - the small print had a four-figure sum for the APR equivalent interest charged. Very, very scary. :shock:

David

notsoblue

SimonAH wrote:

It's always been much more expensive to be poor than rich, but these 'payday loan' companies must surely get regulated? The crippling levels of interest are driving the poorest into worse and worse trouble.

I think its morally reprehensible that this isn't regulated better. The kind of people who are most likely to take out payday loans are those who are bad at managing (and making) money. This industry is just exploiting them.

rick_chasey

notsoblue wrote:

SimonAH wrote:

It's always been much more expensive to be poor than rich, but these 'payday loan' companies must surely get regulated? The crippling levels of interest are driving the poorest into worse and worse trouble.

I think its morally reprehensible that this isn't regulated better. The kind of people who are most likely to take out payday loans are those who are bad at managing (and making) money. This industry is just exploiting them.

Absolutely.

steelie600

If you want a short term loan and youve got crap credit Provident is the best way. Still high apr but no where near the 2000% and above wonga charge!

For example I borrowed £500 of provi last year and total repayable was £950 so APR on that was 90% (i think thats right anyway) BUT I paid it back in 3 months and only had to pay back £629 so cut a lot of interest out

Provi all the way if you cant get a normal loan, and tbh with the banks farking the world up no one can get a loan now anyway!

jds_1981

Rick Chasey wrote:

notsoblue wrote:

SimonAH wrote:

It's always been much more expensive to be poor than rich, but these 'payday loan' companies must surely get regulated? The crippling levels of interest are driving the poorest into worse and worse trouble.

I think its morally reprehensible that this isn't regulated better. The kind of people who are most likely to take out payday loans are those who are bad at managing (and making) money. This industry is just exploiting them.

Absolutely.

I don't imagine they're making terribly large margins after operating costs. Without the fees as-is the companies wouldn't be able to exist. People either pay the fees or they go to a bank who presumably won't lend to them.

Of course, we know better than other people so need to regulate them from their own stupidity. Perhaps we need public financial advisors who can restrict what 'poor' people can spend their money on :roll:

TheStone

Sketchley wrote:

how much cash do you want? £1
how long do you want it for? 1 Days

Borrowing £1 + Interest & fees* £5.56 = Total to repay £6.56

Anyone care to work out the APR on that.

Sums up why APR is a bit meaningless for small amounts over short periods.
They'd probably still lose money on that example.

notsoblue

jds_1981 wrote:

I don't imagine they're making terribly large margins after operating costs. Without the fees as-is the companies wouldn't be able to exist. People either pay the fees or they go to a bank who presumably won't lend to them.

I doubt they're doing it out of charity.

jds_1981 wrote:

Of course, we know better than other people so need to regulate them from their own stupidity. Perhaps we need public financial advisors who can restrict what 'poor' people can spend their money on :roll:

Well I'd expect the government to protect people from making poor decisions. I'm kinda glad we have stuff like the Food Standards Agency etc...

wgwarburton

notsoblue wrote:

jds_1981 wrote:

I don't imagine they're making terribly large margins after operating costs. Without the fees as-is the companies wouldn't be able to exist. People either pay the fees or they go to a bank who presumably won't lend to them.

I doubt they're doing it out of charity.

jds_1981 wrote:

Of course, we know better than other people so need to regulate them from their own stupidity. Perhaps we need public financial advisors who can restrict what 'poor' people can spend their money on :roll:

Well I'd expect the government to protect people from making poor decisions. I'm kinda glad we have stuff like the Food Standards Agency etc...

Hmm... Is it a "role of the government question", then? I don't think the government should generally be protecting us from ourselves... Protecting us from others? Yes. Helping us understand how to make the right choices? Arguably... That's the point of education, isn't it?
Protecting us from ourselves brings in big questions about personal freedom- Smoking? Drinking? Over-eating? Under-exercising? Over-spending? Gambling?
If I blow my wages on a night out and need some cash to tide me over, it might cost me a packet to borrow it if I'm a high risk borrower... That's the way of it, and more fool me, but better that than going hungry or going to a loan-shark?
If I make a habit of it, then maybe I should be offered help... but should it really be illegal to offer the service?

Cheers,
W.

rjsterry

Not sure that is a valid comparison, NSB. Poor food hygiene isn't immediately apparent to the buyer, especially if it's further up the production chain, but the high rates that Wonga charge are pretty openly displayed. Granted there is a problem in that desperate people won't be able to borrow elsewhere at more sensible rates, but I'm not sure how you would solve this through increased regulation.

rick_chasey

rjsterry wrote:

Not sure that is a valid comparison, NSB. Poor food hygiene isn't immediately apparent to the buyer, especially if it's further up the production chain, but the high rates that Wonga charge are pretty openly displayed. Granted there is a problem in that desperate people won't be able to borrow elsewhere at more sensible rates, but I'm not sure how you would solve this through increased regulation.

Let the state run it. :twisted:

jds_1981

notsoblue wrote:

I doubt they're doing it out of charity.

mmhmm

Well I'd expect the government to protect people from making poor decisions. I'm kinda glad we have stuff like the Food Standards Agency etc...

Which is totally different. Money lenders such as Wonga are regulated by the FSA, in a similar manner to how fast the FSA regulates burger joints. Neither will stop you going to feast there.

The Food Standards Agency is responsible for food safety and food hygiene across the UK. We work with local authorities to enforce food safety regulations and have staff who work in UK meat plants to check that the requirements of the regulations are being met. We also commission research related to food safety.

[/quote][/quote]

jds_1981

Rick Chasey wrote:

rjsterry wrote:

Not sure that is a valid comparison, NSB. Poor food hygiene isn't immediately apparent to the buyer, especially if it's further up the production chain, but the high rates that Wonga charge are pretty openly displayed. Granted there is a problem in that desperate people won't be able to borrow elsewhere at more sensible rates, but I'm not sure how you would solve this through increased regulation.

Let the state run it. :twisted:

Nominally the state already provides accomodation and money to people who aren't able to provide for themselves.

SimonAH

A quick check of the net shows that a lot of countries / US States cap the maximum chargeable interest level. This is all I'd advocate.

Oddly Wonga appear to be amongst the more responsible pay day lenders in that they do have proprietory algorithms to detect, they say, a very high proportion of people who are likely to default - and don't lend. Many of the other companies out there will lend to just about anyone and then LOVE it when you can't pay as they will slap on a load of extra charges and then continue to apply the massive interest for the loan going forward.

I refuse to believe, given the massive advertising campaigns and sponsorships that Wonga in particular are conducting, that they are not making money hand over fist. In no way am I advocating making this service illegal or inoperable - but I do think that things like automatic rollover of sums borrowed should be banned and equally that there should be an APR ceiling imposed.

Operating costs for this sort of company BTW are very low compared to a bank giving you a loan. All most payday loan companies do is take a postdated cheque with a guarantee card (zero risk for them, the bank will flay you alive for them if there are no funds to cover the cheque, they still get the money). Not sure how Wonga in particular operate since it's not an over the counter service, but I'm sure it is pretty lean and mostly automated.

SimonAH

Out of interest I just ran a Dunn and Bradstreet on Wonga.com Ltd.

Year to end 2010 (please note that they've been expanding like hell since then, just these are the latest figures posted) they ran a profit of £16.6 million against a turnover of £73.8 million with just 47 employees. That is STAGGERING profitability on the backs of the poorest in society.

Morally that is just, in my opinion, wrong.

rubertoe

Of course preying on the poorest people is wrong.

Welcome to life in the 21st century.

sketchley

SimonAH wrote:

Out of interest I just ran a Dunn and Bradstreet on Wonga.com Ltd.

Year to end 2010 (please note that they've been expanding like hell since then, just these are the latest figures posted) they ran a profit of £16.6 million against a turnover of £73.8 million with just 47 employees. That is STAGGERING profitability on the backs of the poorest in society.

Morally that is just, in my opinion, wrong.

Not wanting to defend them too much, but they are playing a high risk game lending out to people less likely to be able to repay, consquently the reward (profit) if they pull it off is quite rightly equally high. Would be keen to see how much debt is outstanding or not repaid on time or written off completely and how they accout for that in the profit / tax returns.

That asside this stuff has been going on for years with pawn brokers, cash converters, pay day loans, provident, local loan sharks. In many ways it being run by big buisness in the open and (hopefully) therefore with a degree of accountability is clearly an improvement. Question is Wonga cheaper than Cash Converters therefore is the comsumer actually geting a better deal than before? Also if they are making that kind of money then the market will adjust, rivals will come along at lower rate (probably there already) and market forces will drive the cost down.

jds_1981

Sketchley wrote:

Also if they are making that kind of money then the market will adjust, rivals will come along at lower rate (probably there already) and market forces will drive the cost down.

Exactly. They were entrepreneurial enough to be one of the first movers in this market and have therefore received their risk-takers profit.

mtb-idle

making a profit is wrong?

woodnut

Sketchley wrote:

and market forces will drive the cost down.

mmm, the same claim was made regarding privatisation of the utilities. Of course it's impossible to prove we'd be paying less had it never happened, but I strongly suspect we would. Market forces sometimes work, but often don't. You could say Wonga is the outcome of market forces, in this case....which kind of proves the point they don't always work in peoples favour.

rick_chasey

MTB-Idle wrote:

making a profit is wrong?

Depends how you make a profit.

*insert generic '08 financial crisis comment*