Once again the British coalition government are reportedly threatening to do something about Wonga and the other rip-off loan sharks, who prey on the poor and vulnerable. Vince Cable has pronounced! These are always empty threats – strong words and no action! Oh yes the regulators plan to ban their advertising – when? Later of course!
Other counties have banned these companies, but our conniving MPs couldn’t face up to that – decided against it (and simply told the companies to please ‘reform’ – fat chance of that of course!). Some local councils have though started to ban payday loan ads (and their own computer internet access) – Plymouth, and Islington for example. But is that enough to solve the problem? Unfortunately not! Their outlets are increasingly opening on our High Streets (hundreds and hundreds of them) – they are classified as financial institution (like Banks), so the current planning laws can’t stop or hinder them!
The Church of England’s Archbishop of Canterbury (Justin Welby) has been publically very vocal about the evil of payday loan companies, and wants to put them out of business by building an alternative network of credit unions (a bit cynical when it turns out that the Church had invested in Wonga through an online capital investment company; Wonga is one of the best known though not the biggest payday loan operator in the UK!).
In America loan companies are charging something like four hundred percent APR – these loans are legal and regulated in a lot of states, but in a dozen or so state laws make them illegal or not feasible [Arkansas, Connecticut, Georgia, Kentucky, Maryland, Massachusetts (partly), New Jersey, New York, North Carolina, Pennsylvania, Vermont, and West Virginia]. In the UK it a free for all – and people get sucked into serious financial trouble. Wonga as said to charge nearly six thousand percent APR on its loans – ouch!
Columbia control the interest rates (maximum 24% the same as banks), New Mexico restricts total loans and prohibits rollovers.
One of our major football clubs in the North East have further damaged their increasingly sinking reputation by having the Wonga name on their shirts , and are sponsored by them – yet that is an area of the country with the poorest people and highest person insolvency!
Our major charities believe that the personal loan industry is out of control – many believe that they are the biggest threat to personal debt, because they are so readily available (without proper credit controls), and they use the power of strong advertising. They hound vulnerable people and treat them disgustingly with their charges. They pride themselves in how quickly they can make the loan and get the money into someone’s account – and they then competed with each other to be the speediest.
Over a million people a year took out payday loans in the UK (over four million loans and they borrowing over a billion pounds). It is a money spinner for the lenders so is a rapidly growing industry. There are something like 250 of these predatory operators – time to kill them all off!
[Don’t hold your breath though, our parliament doesn’t have the willpower to do anything good or worthwhile].
This is greatly worrying. These Companies are preying on people who have nothing in order to make high Profit and leave the people in a worse condition, most of the time. If you are providing a Money Lending Service for the good of the area, for people who can’t get money through the normal channels (e.g Banks),why do you have to spend Millions ‘Sponsoring’ a Football Team?! The reason is because the Company got rich quick (by charging poor people 4000% interest on their loans!) & the Bosses want to ‘live the high life/dream’, while it’s all still possible. Or until new Laws are passed which will put Wonga out of business in 3 weeks!! Wonga will spend too much, the business will stop growing at the fast rate of the recent past. And people will turn against them/stop getting deals and new customers, (Bolton FC cancelled a deal with ‘QuickQuid’ because of negative publicity). And the Wonga saga will all be a thing of the past in a few years, gone bust like many Companies before (e.g Index catalogue). The World without Wonga/Pay Day Lenders can’t happen quickly enough!!
You call payday lenders “rip-off loan sharks”, but would you be willing to take a gamble on offering payday loans at rates that you would consider to be reasonable? The problem is, payday loans come with a large amount of expenses to the lender that normal loans do not. What the business requires is better regulation, not elimination.
If paydat lenders are so great, then why are they being banned all over the place?
Laws aren’t always good, even if they are well intentioned. The banning of payday loans is a knee jerk reaction to a problem that is unfortunately a cure worse than the disease. Without legal payday loans, where will people turn to? The answer is actual loan sharks, with all the problems that come with them.
The lenders in the UK are guilty of blatent profiteering I’m afraid mycanadapayday. They lend to people who are desperate & most of who, have no way to pay the money back or can’t cover the interest payments. The Companies charge 5000% interest so people often lose control of the debt,which I feel, as well as the UK Govt feels, is incorrect & unscrupulous. So there are going to be new Laws going through the Courts about how much interest these nasty Companies can charge. So I agree with you, better regulation is the key!! Hope it happens quickly!!