We here in the UK and many other climes live in an age of austerity. This is coded language for lots of people are financially on the floor. Newcastle United are on the brink of a deal that may redefine Premier League sponsorship.
There’s little point in wading through the murky and pointless discussion of how we got here in the first place. Let Mr Bridger from The Italian Job guide you when it comes to politicians. ‘Camp Freddie, everybody in the World is bent!’
We’re here now and whatever way society is squeezed you can guarantee that there will always be those in a position to help. Short term loan companies are like erections at a Viagra trial. Not much emotion, lots of interest.
Wonga.com appear to have taken the bait that Newcastle owner Mike Ashley placed when he re-branded Sid James Park, The Sports Direct Arena. But the initial responses don’t seem favourable. Ian Lavery, the Labour MP for Wansbeck who is a season ticket holder at Sid James Park :
“Financial predators who make their money from people suffering from unemployment, low wages and in the greatest financial need. Newcastle United will be sponsored by the money of deprived people up and down the country,”
“If Wonga get this sponsorship through I will not set foot in St James’ Park until it is off the shirts. To have those players running around on that turf endorsing Wonga is an absolute outrage.
“I have more and more people coming to see me and saying that as a result of job losses or benefit cuts they are being forced into these terrible but legal money lenders whose interest rates only then trap them into further debt.”
Michael Martin, editor of the fanzine True Faith said:
“The people who run Newcastle, for the fans, have a social responsibility. I would love them to honestly answer one question: Would you, Mike Ashley, seriously recommend borrowing money from Wonga at those interest rates?
“If you can’t answer yes then they shouldn’t be our shirt sponsors. Newcastle is being used to normalise their product. It cheapens and tarnishes the Newcastle United brand. I wouldn’t want my logo next to them, so what do other sponsors think?”
Wonga.com sponsors Blackpool and Heart of Midlothian football teams and advertises on football clubs’ websites, leading one Northampton Town fan to start a campaign for its ads to be removed.
Who called this type of lending legal loan sharking? Not me guv, but Walthamstow MP Stella Creasy who was specifically talking about ‘Money Shop’ when workers at The Money Shop were invited into classrooms at Holy Family Technology College in Walthamstow as part of a scheme organised by the Young Enterprise charity:
“I know many parents in Walthamstow who share my concerns about legal loan sharking will be shocked to find a charity such as young enterprise letting these companies into our schools and so helping them to promote themselves as socially responsible.
“Until this industry is regulated properly through caps on the costs of credit they have no place in our education system – and I hope young enterprise will think again before allowing their good work to be associated with such firms.”
This is relevant to us because we’ll be in a similar boat sooner rather than later. And I’d appreciate your thoughts – I may be wrong, but I’d suggest to you that ‘White Hart Lane’ as an official trading name, is one living on borrowed time.
Would you be happy with a significant sponsor of Tottenham Hotspur who lent money with representative APR of 4241%?
*would prefer ….hic
So, you made it to the beer store then.
Snorg Tees Palladium, with a different one of the lovely ladies, preferably falling out of the tees, plastered on each shirt manfully donned by our valiant lads.
Chevy to the Levy Stadium
Why the hostility towards Wonga et al? The very fact that Wonga make good money doing what they do is proof in itself that most of the people borrowing money from them DO manage to pay it back. If Wonga exclusively loaned money to individuals who defaulted, they would not do very well, no?
They by and large offer credit to people who have no other way of obtaining credit. Are we really saying that these low-income individuals should be banned from borrowing money, even though there is a company out there willing to lend to them?
I don’t know what the numbers are like exactly, but I do have ten years’ experience from consumer banking av credit, so I know a little what I’m talking about. There is no way Wonga’s debtors are delinquent at a rate higher than 15% per year. That is to say that MINIMUM 85% of their customers manage to pay the money back.
But since they lend money to people who are at higher than usual risk of default, there will be more defaults than for more traditional lenders. So they have to charge higher interest rates to reflect the higher risk they are taking. However, if the interest rates were extortionately high such that they left a large overhead beyond the fair risk premium (as people seem to accuse them of), then someone else would come along and do it cheaper. There are plenty of companies offering these kind of services, and if one of them could steal huge market share by lowering their interest rates, they would.
But society frowns on this sort of thing, thinking seemingly only of those who don’t manage to repay their debts. Yes, there is a risk involved in a low-income individual taking up a high interest loan. Some of them will be screwed. But since when is it the government’s (or a football club’s) moral duty to decide which risks individuals take.
Imagine you’re a struggling single mother in Newcastle. You just about make ends meet washing floors at the local school, but you want something more for your young’uns. So you come up with a plan to have a mobile coffe stall that you’re going man in the city, selling quality, quick coffee to the people of the town. All you need is £10K to get things going. Unfortunately giving you lack of income or collateral means no bank is going to lend you a dime. And the government have just banned “legal loan-sharking”, because a few idiots couldn’t handle it. So now you and your young children are f*cked, doomed to keep washing floors bacuase society has decided it is too risky for you to try to improve your lot in life.
Yes, I absolutely think this industry needs to be regulated. They lend money, which is banking, and so require the same oversight as any other bank. But labelling quick-loan companies as the devil’s work just seems silly and naïve. They offer a valuable service that society demands.
And some people are not very good at sticking to budgets. That’s hardly Wonga’s fault.
Yes, that’s me. My weekly budget of £10 for newspapers etc. was overspent when I had one raisin Yorkie too many. Now my wife is threatening to withdraw my walking stick for being too profligate.
Raisin Yorkies are not a human right. Learn to live within your means, man!
One luxury too many I guess.
400 OR 500 PERCENT. you have to be kidding. its usury.you think its alright because peeps pay it back.
Nominal interest at wonga is 360%, to be precise. But that’s irrelevant.
I’m not saying it’s alright because customers pay it back. I’m saying it’s alright because:
-The vast majority of their customers are extremely satisfied. Their NPS (a common measure of customer satisfaction) is extremely high, far higher than pretty much any other company within banking. They are clearly delivering a valuable service to many, many people – and they’re doing it very well.
-If it was possible to offer this type of loan much more cheaply than Wonga, while still turning a profit, someone else would be doing it. So the rates aren’t extortionate, they simply cover their risks and operting costs, plus give them reasonable RoI.
good article hh .these assholes need to be put out of business.i know quiet a few peeps who have gone down that road . desperate to get the gas or electricity turned back on,or make a car payment to get to work. bastards! WELL DONE MATE FOR BRINGING THIS TO EVERYBODYS ATTENTION. :daumen:
Yeah, right on! What bastards they are, offering people a way of paying the gas or electricity or car payment when they’re short on cash!
Representative APR of 4241%
I’m not financially clued up, which is why my wife handles all our finances. But that rate, I assume would be divided by 52, assuming a weekly payday loan. So if I borrowed £100 for 7 days I would have to pay back £181.55 at the end of the week? It still looks scary no matter which way you look at it.
If you borrowed £100 for seven days, your total due for repayment would be £112.78, according to the website. Yes, that works out to an extremely high APR, due to the fee (£5.50) combined with the short duration of the loan. But you’re still only paying just under £13 to borrow the money at extremely short notice, without collateral.
Looking at the “representative” APR, the example states a loan of £207 for 20 days. Evaluating the annual percentage rate on a 20-day loan is rather ridiculous. It’s like measuring millimetres with a yardstick.
There are certainly other, more dubious actors out there. In the case of Wonga, however, they make it abundantly clear in pounds and pence exactly what you will have to pay, by when. If it’s too expensive for you, don’t borrow it.
Apparently, 92% of Wonga’s customers would recommend them to a friend. For reference, that’s a higher degree of customer satisfaction than Apple, Google or the NHS.
The service these lenders provide is in high demand, and the vast majority of their customers appreciate what they have to offer.
Politicians are up in arms only because bashing anyone who lends money is good politics these days. It’s not good policy. Plenty of people need loans like these on very short notice, that they wouldn’t be able to get any other way.
I also have a feeling that the people who borrow more than they can afford are quite frequently the type of people who would have ended up doing so even without Wonga. They just would have had to fill out more paperwork before a different type of lender geve them the shovel to dig their own grave.
Closing bars earlier, or requiring strict licences to sell alcohol in stores, will not stop an alcoholic from drinking. It only makes life more difficult for the entire rest of the population, who don’t have (as big a) problem with drinking. By the same token, limiting this type of loan will not deter profligate and irresponsible individuals from borrowing beyond their means, it will only make life difficult for a much larger group of responsible people who need cash on short notice, and won’t get credit from a traditional bank.
I wrote:
“that they wouldn’t be able to get any other way”
that’s not true, of course. Actual criminals will always be more than happy to lend money to those in need. If you think Wonga are expensive you should check up on the Cosa Nostra APR. And their debt collection practices lead to far lower customer satisfaction than Wonga.
If we ban loans such as those offered by Wonga, who do you think will fill the void in the market that they leave?
This is why Robin Hood took off in England and not in America.Infact the Sheriff of Nottingham really became a cult hero there and many police chiefs adopted the first part of the name.
yep i agree lol .you cant pay your home loan because you’ve been sick . hey i can help you . just sign here.no collateral no probs .just try to get any finance for the next 7 years if you default . also if you do happen to own anything im going to get a piece of it . such nice people a pleasure to deal with . king of cash payday loans . these type of company’s have been pilloried by much smarter than i. and you i might add .for people well aware of finances and the cost it is a sound option .on the other hand there are a lot of desperate, hopelessly inept at finances who cant balance 2 bricks let alone finances
“on the other hand there are a lot of desperate, hopelessly inept at finances who cant balance 2 bricks let alone finances”
As I have said in a different post, there are alcoholics who can’t relate to alcohol in a responsible way. Do we ban everyone from drinking? No – we hold the alcoholics responsible for their actions.
If you haven’t a clue about finance or budgeting, maybe you shouldn’t borrow money without asking someone who does.
Why should people who are capable of making a resoned decision about their ability to repay a loan (the vast majority) be barred from borrowing money from whom they please, just to protect some irresponsible people from themselves.
If you borrow more money than you can pay back, it’s your own problem, not the parliament’s problem or wonga’s problem (well sort of, because they might lose the money they lent you).
And as for your example of someone who can’t afford to pay their mortgage because they’re cash strapped in the short term. Many people might be able to avoid having their home foreclosed precisely because these loans exist.
If they foreclose on your home, will your credit rating be any better than if you default on a short term loan? Don’t think so.
A lot of people make it out that these companies lie to you, and don’t tell you what you actually have to pay them. For some, no doubt, that is true. However, if you’ve ever been on wonga, you will know that this in not the case. They couldn’t possibly make it any clearer. You tell them how much you want to borrow, and for how long. They tell you exactly what you will have to pay by maturity.
If wonga is telling you that it will cost you £12.78 to borrow £100 for a week, all you need to do is think to yourself “will I have £112.78 available to pay them next Wednesday”.
If the answer in “no”, don’t borrow the money.
If anyone misunderstands this, it is because they are fooling themselves, not becasue wonga are fooling or misleading them.
Yes £112 repayment seems reasonable off £100 loan But do you think that the people in that position are not only aggregating their financial problems but their social problems too in an accumulative fashion. I’m not disagreeing with you. Your post is reasoned and well thought out. I just fear that debt problems of a social class will create more problems than it will solve, (for all of us).
it all sounds sooo reasonable . if you cant pay it all back and mabe only pay the interest.lets see im no financial guru but for 12 months would the interest be around six hundred .on a hundred what a bargain
If you’re borrwing money you can’t afford to pay back then, of course, you are aggravating your financial problems. But that is not limited to any one type of loan or specific interest rate level.
If you borrow £100 000 from the bank to buy a house, at a reasonable 6% APR, but you can’t afford to make payments; are you any less f*cked than someone who can’t afford to pay 360% interest on £100?
People default on every type of loan at every imaginable level of interest. It is not a problem isolated to consumer credit and short term loans. Why are people not calling for a ban on banks giving home loans? Is it not also a tragedy when the bank comes and kicks you out of your house? Is it not true that the lower tiers of class society are more likely to default on these loans, just as it is with wonga?
As I’ve said before, there is no reason why companies like this should not be regulated just like banks. They offer a banking product. But there is also no reason we should act like they are any morally better or worse than traditional types of loan.
The way I see it as follows
The banks by a combination of stupidity and greed-caused the current economic situation.
The Insurance companies have fleeced the public for ages-because you cannot own a home or drive a car without it, now we’ve got a situation where the government are looking into the billions they’ve overcharged the public, surprise-surprise. Oil companies inflate prices when the price increases but still keep them up when the price drops.
All these factors plus a load more-influence hight street spending and living conditions-yet AIG,Northern Rock, Aviva, Barclays ect, have no bad press when it comes to advertising-why’s that then? yet Wonga-who offer a short term way out offering what used to be called an emergency or bridging loan get it with both barrels- They clearly tell you up front what the deal is and even get an old codger and a slide calculator to show you beforehand-unlike PPI and the countless mortage deals offered by more ‘creditable’ sellers..rant over and out
LL,
You sound like an intelligent guy. But these things are nothing but disgusting. They prey on the less intelligent, and to normalise something like this is downright awful and irresponsible.
Borrow £207, then in 20 days pay them back £254.42?
http://www.wonga.com/money/is-this-apr-expensive/
Yes it is. Dress it how you want. Most people have been conditioned to spend beyond their means for many years, as they keep up with the Jones’. Credit Card companies encourage people into further debt by upping credit limits even though the “customer” has not demonstrated any ability to pay back outstanding balances or even pay off the monthly interest accrued. I could be forgiven for thinking so but your views make it sound like you have never had to want for anything, be it an education, money or whatever and that you are from a more privileged background than most? Of course, it’s not right that I should make that assumption – but loan sharks weren’t going round preying on the wealthy. They preyed on those with little or no money, and “offered” them a “solution”. Wonga is no different in that regard.
They are providing money so people can go out/buy something and pretend they have money, or maybe pay off a gas bill, pay back an inordinate amount of interest on this loan, and repeat the trick. That is all. There is nothing healthy about it. As much as I can be critical of those “idiots” who use these “facilities”, it doesn’t mean I should think all is OK with it. Or that I should believe this is all a part of free enterprise, that this is no different from borrowing from a traditional lender. The interest alone should tell you it is very different.
In all honest MS I’ve no interest either way-there’s nothing I can do about so why bother myself over it anyway. But I do get pissed with double standards-as with the Bale issue-If he’s ours then it’s OK-well it’s not OK-but in this instance-It’s OK for the top end to shaft you with impunity-yet the scummier end of the market get pelters-how does that work-When the holiday season’s over in Blackpool do the part timers suddenly bugger off to the Bahamas until May? do the hell as like-they’ll sign on or get shit work- Prime targets for a Womga loan I guess-hang on-don’t they sponsor Blackpool FC? Oh, condemnation only applies to Premiership teams- you see my point?
What I really want to know though-Does Ronnie W get royalty payment for appearing on Wonga’s ad’s because that skateboarding trick’s pretty impressive ;-)