MSE News: Wonga responds to US debt comparison jibes

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  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    Good analogy, sntpl.

    Out of interest, though, are you saying that in an ideal world these companies should have checked your history and realised you had problems and refused to give you a loan?
    What would you have done then?
  • Percy1983
    Percy1983 Posts: 5,244 Forumite
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    Pete,

    Firstly I appreciate and respect your views, it is always good to hear differing opinions rather than people blindly agreeing with others comments, also thank you for your sympathy, however you are incorrect in what you say - the responsibility rests on both parties.

    Also disagree with your cliff analogy, we are talking about a 'professional and responsible' financial industry capable of making decisions, not a mass of land that has no thought and no voice, it is a silly comparison.

    Onto facts and I will lay a few out right here - my borrowing history;

    Payday UK - 4 loans, 13 interest only 'rollovers' plus 4 final payments
    Payday Express - 7 loans, plus 7 interest only 'rollovers' plus 7 final payments
    Lending Stream - 3 loans, 6 payments
    Wonga - 19 loans including 3 topup loans, 1 rollover, 16 final payments
    Quick Quid - 2 loans, 3 final payments
    Pounds Till Payday - 9 loans, 9 final payments
    Txtloans - 13 loans, 13 final payments
    Cash Genie - 3 loans, 1 interest only rollover, 3 final payments
    24/7 MoneyBox - 1 loan, 1 final payment
    SafeLoans - 1 loan, 1 final payment
    Wageday Advane - 1 loan, 1 final payment
    Uncle Buck - 1 loan, 1 final payment

    Note that the last 4 single loans were the last I took - after everything before it. Also note that Cash Genie was the only one to decline a loan application during that time.

    Now as I have already explained I accept my share of responsibility and fault but lets discuss the industries, and I refer to the OFT Responsible Lending Guidelines produced in February this year;

    2.2a - Creditors should not use misleading or oppresive behaviour when advertising, selling or seeking to enforce a credit agreement - Search the internet, many payday loan firms and brokers advertise as guaranteed acceptance, no credit checks, no paperwork etc. It is misleading, designed to entice the desperate.

    2.2b - Creditors should make a reasonable assessment of whether a borrower can afford to meet repayments in a sustainable manner - These are short term loans, when a person is borrowing from the same company every single month, bearing in mind that these lenders ask no questions about other financial commitments in their application forms, then clearly the industry is not making reasonable assessments.

    2.2d - Creditors should monitor the borrower's repayment record during the course of the agreement, offering assistance where borrowers appear to be experiencing difficulty - this applies to those stuck in a borrowing cycle, or those who borrow from such like Payday UK, rolling over for 6 months solid without any problems ....

    2.2e - Treat borrowers fairly and with forbearance if they experience difficulties - Payday UK after my first loan told me of the disasterous consequences of missing my early payments which set the ball rolling, they should have helped me. I also went through absolute hell setting up repayment plans, its all in my book, too much to even consider writing here!

    I could go on and on, the document from the OFT is free to download off their website, going into credit agreements, assessments of affordability etc. I will however go back to some issues I know of;

    After I finally defaulted with Pounds Till Payday they told me they did not have the facility to set up a repayment plan, but twice recommended I paid the money back in full and borrowed again assuring me my credit file would not be damaged and guaranteed I would be able to immediately borrow again. I have this in writing.

    Payday Express stated in their website terms and conditions that they would not always carry out a credit check.

    Wageday Advance stated they could not offer repayment plans to first time customer's, only those who have built up a level of trust through 'a number of loans'.

    Wonga for example offer trust ratings, where people can borrow more every time they sucessfully repay a loan in full on time, but clearly do not cross reference this against any credit checks? For example one person I spoke to borrowed 400 from Wonga, then went on to borrow for 11 months straight, every month increasing the amount with the last loan at 960 pound before setting up a repayment plan after speaking to me.

    The list is endless it goes on and on. The payday loan industry has a responsibility to act in the appropriate manner, basing decisions on guidelines set out by the OFT. Some of the guidelines are not strong enough in my views, and in some cases many of the lenders do not conform to what is being requested. BUT the industry cannot possibly ignore even an ounce of responsibility and blame for my circumstances, I applied for all of those loans - they approved every single one of them.

    And to finish on an analogy ... I saw a drunk propping up the bar in my local pub, when he asked for a pint, the bar tender told him no, you have had too much to drink and I cannot let you continue - go home, and sleep it off.

    So in short you had money problems and just kept digging, I still can't see how it is anybodies fault buts yours.

    As for the drunk man being refused, they are clearly drunk so not in a right state of mind, I guess you were sober when taking all these loans.

    I did have a high level of debt, yes the banks kept offering me more, but its my fault I took it not the banks.

    Self control and all that...
    Have my first business premises (+4th business) 01/11/2017
    Quit day job to run 3 businesses 08/02/2017
    Started third business 25/06/2016
    Son born 13/09/2015
    Started a second business 03/08/2013
    Officially the owner of my own business since 13/01/2012
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    Percy1983 wrote: »
    As for the drunk man being refused, they are clearly drunk so not in a right state of mind, I guess you were sober when taking all these loans.
    While I see the difference, there's only so far an analogy can go.
    But even so, I think spending money can be as addictive as drinking.

    The point is that the pub rightly takes some responsibility for the state of their customers. Lending companies should do the same.
    All the responsibility? Most of the responsibility? No. Some of the responsibility. The same with the pub.
  • Just to reply in order;

    JimmyTheWig - In an ideal world the companies should have done one of two things;

    1. Refuse the loans in the 'early stages' once financial difficulties was becoming clear.
    2. Realised the financial difficulties and stepped in to offer alternative repayment arrangements.

    Personall believe option 1 is the correct course of action - what would I have done then?? Well I would have found myself in an exceptionally difficult position and would have had to to rethink my whole position, but the point being had they done so after the first 2 or 3 companies, first few loans, it would have saved me over a year of hell and thousands of pounds of dead money - in the long run they would have saved me, without me knowing it.

    Percy1983 - Analogy wise, the drunk was not in a right state of mind as you correctly point out - but could the same rule not apply to those who are in a financial mess, that their decisions are being made whilst 'not in the right state of mind' - it really is the same kind of thing, there are no black and white answers, it is a much deeper problem. Some could argue that, analogy wise, I was in fact NOT sober.

    JimmyTheWig - Again correct, analogies only go so far ... but again it explains the clear point, that in some degree blame and responsibility has to to be shared between both parties. I have accepted mine, the industry hasnt.
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    Well I would have found myself in an exceptionally difficult position and would have had to to rethink my whole position,
    Do you think, playing devil's advocate here, you might have ended up going to an unregulated loan shark?
  • I cant say what action I would have took, but genuinely I cannot see any way I would have gone to an 'illegal loan shark' ... although I can see why you ask, from the devils point of view!

    Im pretty sure other people might have gone down that route.

    What I would say is that using the lesser of two evils doesnt make it right.
  • Herzlos
    Herzlos Posts: 14,726 Forumite
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    Good point.

    Maybe banks should have to tell you the APR they are charging you each time they tell you how much you are going to be charged for your overdraft usage.

    For example, go overdrawn by £1 for 1 day with Halifax and get charged £1. Am I right in thinking the APR for this is over a googol?
    I make it 7,515,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000%
    And people complain about Wonga?

    How do you arrive at that number?

    Surely if you were overdrawn by £1, and remained so for a year, you'd have paid £365 'interest' on a loan of £1, which would be 36,500% APR?

    Though to make it worse, if you were overdrawn by £0.01 the APR would be 3,650,000% (3.65 million percent), which makes these pay day lenders look like an incredible deal.

    Yet the banks don't need to quote an APR.

    Of course these are fixed figures within ranges, IIRC (for HBOS): authorised overdrafts < £1000 are £1/day, authorised overdrafts > £1000 are £2/day, and unauthorised overdrafts are £5/day.
    So with an authorised overdraft your better off with the overdraft, and unauthorised overdrafts you're probably better off with a PDL.
  • Herzlos
    Herzlos Posts: 14,726 Forumite
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    2.2b - Creditors should make a reasonable assessment of whether a borrower can afford to meet repayments in a sustainable manner - These are short term loans, when a person is borrowing from the same company every single month, bearing in mind that these lenders ask no questions about other financial commitments in their application forms, then clearly the industry is not making reasonable assessments.

    Borrowing money every month doesn't have any relevance to their ability to pay the money back. If they clear the bill within the month and borrow more, then they obviously are able to pay it back.

    If each month they are borrowing more and more in line with increased interest payments, then maybe they should try and detect this behaviour and do something about it, but it's hard for them to do as that behaviour may not be entirely obvious (especially if you're borrowing from company B to pay off company A).
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    Herzlos wrote: »
    How do you arrive at that number?

    Surely if you were overdrawn by £1, and remained so for a year, you'd have paid £365 'interest' on a loan of £1, which would be 36,500% APR?
    I don't believe that this is how APR works.
    Because in my example I am not going overdrawn for a year, I'm going overdrawn for one day. If the £1 charge was levied after a year then I think you would be right, but it's not.
    I believe APR is equivalent to saying "what if interest was left to compound over the year?". In this instance we're paying the charge so there is no compounding, but the APR doesn't care about that.
    So my point was because of just one day the debt is doubling. So from an APR point of view the debt would double every day for a year, leading to my crazy percentage.

    But I've realised that I wasn't right.
    You don't pay the fee straight away - it's on average a month and a half afterwards (http://www.halifax.co.uk/bankaccounts/rates-rewards-fees/).
    So from an APR point of view the balance is doubling every 1.5 months. So over a year it would double 8 times. That gives an APR of 25,500%.

    But I'm not convinced that that is right, either.

    Does anyone know how you work it out?
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    Ok, my next guess is around 2,500,000,000,000,000,000% APR.
    That's based on leaving the account overdrawn by £1 for the whole year, paying off the fees when they get deducted each month.
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