[News] Wonga - on verge of collapse.

[happypig]

The problem I have with Wonga and the rest of thier ilk is that if customers (victims) don't pay back the loan & charges within the set period then exorbitant compound interest rates mean the debt rapidly escalates and the victim becomes less and less able to pay and gets into an inescapable spiral of debt.
There should be a limit to the amount of penalty charges that can be levied for late payment before the lender has to go to court to recover the debt, that's the way it works with hired cars or tools; if I hire a £500 drill for a week for £25 but then, rather than return it I chuck it in the river, the hire company will likely sue me for the cost of a new drill. They cannot just keep charging me £25 a week ad infinitum.
Renting money should be the same.

 

[Stat Brother]

The problem I have with Wonga and the rest of thier ilk is that if customers (victims) don't pay back the loan & charges within the set period then exorbitant compound interest rates mean the debt rapidly escalates and the victim becomes less and less able to pay and gets into an inescapable spiral of debt.
There should be a limit to the amount of penalty charges that can be levied for late payment before the lender has to go to court to recover the debt, that's the way it works with hired cars or tools; if I hire a £500 drill for a week for £25 but then, rather than return it I chuck it in the river, the hire company will likely sue me for the cost of a new drill. They cannot just keep charging me £25 a week ad infinitum.
Renting money should be the same.

A word to the wise.

Unplug the drill first.

 

[Triggaaar]

Please see my original post on this thread, taken from the Wonga website

Borrow £150 over 14 days
Interest rate 292% pa (fixed)
Total amount payable £166.80
Representative 1,509% APR


So yes they do show it.

I didn’t say they don’t show it. You’ve misread. This is what I was saying:
In reply to

money costs something, at least the opportunity cost before considering the cost of defaults. those call centres, IT systems and business overheads are not free either, so the unit cost of a arranging a loan is going to be relativly fixed cost whether its £100 for a week or £1000 for 2 years.

I said:

So it would be fairer if they said it'll cost you £16 to borrow the money for a couple of weeks, and then just another £1 per month after that. But they don't do they.

and the reply was

that is what they do. they have to show a APR rate for comparison.

No. No, that isn’t what they do. They do not charge £1 (or thereabouts) afterwards.

 

[Triggaaar]

No it's not different, just a different price for a different product.

Yes, a different price, which makes your point irrelevant (as you were saying people were ok with a charge of £25 for a £500 piece of machinery, and then you were comparing that to a charge for borrowing money. It’s a poor comparison.

The companies are the victims of those that do not fulfill their contractual obligations that they signed up to.

I guess you run, or work for one of these scummy companies.

I have never said reasonable , I merely pointed out the cost of the loan in monetary terms instead of being hysterical about APR.

The problem many people have with these companies is the cost if you don’t pay off within the first few weeks, and the APR helps show just how much of a rip-off these loans are.

So what, as above different product different price.

So don’t use the crap example to try and suggest that the charges are reasonable, which is what you do here:

To put the counter argument, since so many on this thread seem really happy about a service company going bust and putting the staff/workers out of a job.

The use of APR for a loan of a week is totally misleading. APR is used a comparator for loans to compare over longer periods, i.e per year not a week.

Everything (well most things anyway) have a cost. A newspaper costs, a pint of beer costs and so too does money. In an example given above, I know not if they are genuine figures** the cost of borrowing £500 for a week was £25, a big APR, but the cost was simply £25 for the use of £500 for a week. Anybody hired any equipment from tool hire places etc ? Would anybody complain about being charged £25 for the use of a £500 piece of machinery for a week, or car hire a £15,000 car for £100 per day ? Probably not with such vehemence and outrage as I read when it concerns the hire of money.

 

[GOM]

So it would be fairer if they said it'll cost you £16 to borrow the money for a couple of weeks, and then just another £1 per month after that. But they don't do they

I would happily borrow from you at a cost of £16. I would also happily not pay it back and allow you to charge an extra a pound a month as a penalty.
Just don't offer the same deal to too many 'cos it could get expensive for you.

 

[Triggaaar]

It would though........

You've probably mis-read my post. Beorhthelm was arguing that setting up loans cost money, even if it didn’t then cost much once the loan was made, so I said why don’t they just charge a small amount after the first few weeks (eg £1), and he said that’s what they do.

Are you suggesting that on your middle example you’ll only have to pay £1 a month interest if you don’t pay it off after the first 2 weeks?

 

[Goldstone1976]

Agreed.

You can't have it both ways. Do you want these companies to be illegal or not?

I want them to be illegal. They’re not. Given that they’re not, I’d rather there was legislation in place to significantly reduce the interest they are allowed to charge than that several hundred people lose their jobs, mostly through no fault of their own, in an economically deprived area of the country.

 

[Triggaaar]

I want them to be illegal. They’re not. Given that they’re not, I’d rather there was legislation in place to significantly reduce the interest they are allowed to charge than that several hundred people lose their jobs, mostly through no fault of their own, in an economically deprived area of the country.

But significantly reducing the interest they're allowed to charge will lead to there being less jobs available at these scummy companies.

 

[Goldstone1976]

But significantly reducing the interest they're allowed to charge will lead to there being less jobs available at these scummy companies.

Not necessarily. Price v volume decision.

 

[dazzer6666]

You've probably mis-read my post. Beorhthelm was arguing that setting up loans cost money, even if it didn’t then cost much once the loan was made, so I said why don’t they just charge a small amount after the first few weeks (eg £1), and he said that’s what they do.

Are you suggesting that on your middle example you’ll only have to pay £1 a month interest if you don’t pay it off after the first 2 weeks?

Maybe - the 1500% APR is without any additional charges - it's the effective annual rate based on the base charges shown. I'd read your comment as suggesting they must be adding extras to be showing 1500% APR, but they're not. The APRs including their penalty charges for late payment are even more mind-boggling.

 

[Geestar]

So now where do we go when we're desperate?

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[pb21]

They lent 0.4 billion in 2015 (latest accounts available)

I'll hazard a guess someone who needs £300 now who expects (hopes) to have more money 3 months later.

Well clearly and they clearly have lent quite a bit to these people too, however I am struggling to imagine a scenario where this would be a sound and feasible financial decision.

Under what circumstance would you borrow £300 for three months, and then pay £450 back?

 

[dazzer6666]

Well clearly and they clearly have lent quite a bit to these people too, however I am struggling to imagine a scenario where this would be a sound and feasible financial decision.

Under what circumstance would you borrow £300 for three months, and then pay £450 back?

When you're desperate.........?

 

[Stat Brother]

Well clearly and they clearly have lent quite a bit to these people too, however I am struggling to imagine a scenario where this would be a sound and feasible financial decision.

Under what circumstance would you borrow £300 for three months, and then pay £450 back?

I can think of a whole host of legitimate reasons for borrowing the money and paying the larger amount.
I guess you are forgetting these companies USP is 'call now have the money in 15 minutes'. No fuss, no forms and most importantly no waiting.

 

[pb21]

I can think of a whole host of legitimate reasons for borrowing the money and paying the larger amount.
I guess you are forgetting these companies USP is 'call now have the money in 15 minutes'. No fuss, no forms and most importantly no waiting.

I cant think of any legitimate reasons where it would be a sound financial decision to pay £150 for £300 now, rather than wait two month and have it for £0.

 

[dazzer6666]

I cant think of any legitimate reasons where it would be a sound financial decision to pay £150 for £300 now, rather than wait two month and have it for £0.

Luckily never been in such a situation but it's not that difficult to imagine at all - particularly if you have bad credit history and no chance getting anything from banks, credit cards etc. Bailiffs evicting you (now ?) for non-payment of rent ? Leccy/gas about to be cut off in midwinter ? Unable to feed your kids ? Urgent repair to your car which you have to have to get to work ?

 

[Geestar]

I cant think of any legitimate reasons where it would be a sound financial decision to pay £150 for £300 now, rather than wait two month and have it for £0.

Lucky you

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[Stat Brother]

I cant think of any legitimate reasons where it would be a sound financial decision to pay £150 for £300 now, rather than wait two month and have it for £0.

Luckily never been in such a situation but it's not that difficult to imagine at all - particularly if you have bad credit history and no chance getting anything from banks, credit cards etc. Bailiffs evicting you (now ?) for non-payment of rent ? Leccy/gas about to be cut off in midwinter ? Unable to feed your kids ? Urgent repair to your car which you have to have to get to work ?

Or even the quite simple:-
'Bollox I've run out of cash, £300 will tide me over till payday, and a bit of over time will cover the interest'.

 

[DavidRyder]

The problem with Wonga is that there was a desperate market waiting for them to pounce. Right company, right place, right time. They arrived just as the banks shut up shop. Wonga started to offer loans of £500, the sort of amount that the bank would allow as an overdraft until the crackdown. People needed this small amount to 'tide them over' until pay day. They would offer the £500 at £25 week except that it would never be paid back as the interest was higher than the amount being paid back!
Personally I'd line up all the directors and lock them away for life.

You'll have to find which Caribbean hideaway their Yacht has taken them to first...

 

[Lower West Stander]

There seems to be a bit of confusion in the press about whether to slag them off or not.

On the one hand they are a terrible bunch of extortionists. But if they go bust a lot of “hard working staff” will lose their jobs whilst people who rely on them for short term help will find it a lot harder.

You can’t have it both ways. Personally I think they provide an important service which cause a problem if it goes.


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