Time for a new campaign? Short term loans scandalous

opinions4u

Klinsmann wrote: »

Now the bank charges campaign has succeeded, can Martin take a new one on?

Short term loan compainies are a disgrace. I was horrified a couple of years back when Wonga charged about 2600% interest on a one month loan. They're over 4000% now even though central interest rates remain tiny. Today I saw Pounds2day offer loans at 5569.40% - get £100 for 6 months, pay back monthly and final cost £260. All this on TV and during daytime slots and around the time children would be watching TV.

Have the FSA/Bank of England (whoever) no ethics or teeth to stop this? Have the company owners/shareholders no shame? This is super-exploiting the neediest and most desperate in society. It makes store cards and credit cards look generous with their 20, 30, 40% plus interest. That these companies exist at all makes the UK a worse place to live.

Can their be a campaign against these companies and in favour of proper regulation?

The reason Wonga's APR has changed is nothing to do with what they actually charge, but everything to do with the time they charge for.

The regulator merely suggested that they shouldn't quote the APR based on full month of borrowing as most of their loans last for less than a full month and involves a minimum charge. Amount repayable remains the same, APR quoted increases.

This latter point is rather important. These loans are only a problem if the borrower fails to give the money back on payday or is stupid enough to get in to the multiple PDL routine.

Now, if you borrow £5,000 on a credit card balance transfer with a 3% fee and pay it off 5 days later, how come the card company can claim a 0% APR?

(Edit: Note, if you feel like you may need a payday loan get over to the Debt Free Wannabe Forum and get help with managing your money instead. Paying for this sort of debt is a waste of part of next month's wage).

ILW

As said before, not much point going on about how bad it is, without suggesting an alternative.

Klinsmann

Apples2 wrote: »

That just sounds infantile. Most on here will happily enter a debate about it.

You need to come up with a solution, not just dismiss the current product.

What APR would you like to see on a short term loan?
How much would they earn over the 25 days of the loan term?
Could you make a viable business from that figure??

There will ALWAYS be a requirement for short term fixes for those without disposable income?
Do you simply remove the facility and prevent them from ever obtaining a loan akin to sticking two fingers up at them with an "I'm alright Jack" attitude?
If not, what do you propose?

If you are suggesting some Government backed, low interest rate loan for all. We'd all be getting our loans from them and not the banks so the system would collapse.
what happens when they fail to repay? The rest of the taxpayers cover it and be happy?
Or are you suggesting the poorest of the poor get the best rates and the richest of the rich get royally humped over?

"That just sounds infantile." OK, hands up to that but some reactions made me sorry I spoke. You'd be right that I haven't thought this through (but discussion could help that) though interest rates on offer that aren't in the thousands and perhaps reasonable flat rate fees would be a start.

Interesting reaction from contributors though, good luck with any campaign you do get involved in.

fozmcfc

Apples2 wrote: »

That just sounds infantile. Most on here will happily enter a debate about it.

You need to come up with a solution, not just dismiss the current product.

What APR would you like to see on a short term loan?
How much would they earn over the 25 days of the loan term?
Could you make a viable business from that figure??

There will ALWAYS be a requirement for short term fixes for those without disposable income?
Do you simply remove the facility and prevent them from ever obtaining a loan akin to sticking two fingers up at them with an "I'm alright Jack" attitude?
If not, what do you propose?

If you are suggesting some Government backed, low interest rate loan for all. We'd all be getting our loans from them and not the banks so the system would collapse.
what happens when they fail to repay? The rest of the taxpayers cover it and be happy?
Or are you suggesting the poorest of the poor get the best rates and the richest of the rich get royally humped over?

Somehow I have a feeling Klinsman won't have the understanding and revelant knowledge to attempt to answer your post.

Clearly they don't even understand what APR means and how irrelevant it is to a loan that could with Wonga be taken out for just 1 day.

ILW

Klinsmann wrote: »

"That just sounds infantile." OK, hands up to that but some reactions made me sorry I spoke. You'd be right that I haven't thought this through (but discussion could help that) though interest rates on offer that aren't in the thousands and perhaps reasonable flat rate fees would be a start.

Interesting reaction from contributors though, good luck with any campaign you do get involved in.

Flat rate fees on short term loans generally equate to massive APRs.

Idiophreak

Don't think it really helps too much to study the APR's here...If someone came to me, with poor credit history, and asked for a £100 loan for two weeks...how much would I expect to earn from the deal? I don't think I'd bother for less than £20, maybe even more to that. Would that make me a shark?

Klinsmann

fozmcfc wrote: »

Somehow I have a feeling Klinsman won't have the understanding and revelant knowledge to attempt to answer your post.

Clearly they don't even understand what APR means and how irrelevant it is to a loan that could with Wonga be taken out for just 1 day.

On other boards I have been in discussions that are going like this one and I know that repetitively defending oneself is a bit pointless, but I do resent being patronised as above. I agree with hindsight that I should have explained myself better. And of course I understand that these lenders have their uses, especially short term and I do know what APR means, thank you. I should have said that I fear that in current conditions these lenders would be used as a rolling prop by some and that as such they would need close scrutiny and possibly action. It would be great to have the companies actually release figures as to what percentage of clients are frequent users and some figures about people who use them extensively and the resulting interest against borrowing. Of course this does not enable us to see what income the client has and how affordable loans are form them and the impacts on their lives, so again I acknowledge that I should have come with, or asked for, examples of such research. Hopefully that is a bit better explained, and if a moderator wishes to close this thread as I've clearly not struck a positive chord with my fellows, feel free. I am grateful for the constructive responses (even with critical elements) from members, it is an interesting area and I close hoping never to need these companies.

Apples2

That's better...

right, wrong, agree, disagree... it's what debating is all about.
Get it in the open.

ILW

What would the campaign be for?

paddyrg

I agree those APR's look outrageous, but it is a quirk of a formula designed to compare rates over multi-year terms that has to be used for these short ones!

Great example, if you borrow £100 until you get paid next week, and we agree that you'll give me a tenner for my trouble, it seems an equitable agreement, it sounds "about right", especially if I don't really know you. Except the APR would be about 14000%!

However, yes, I do believe some regulation would help as the area is too full of sharks just now.