Wonga profits leap 35% as demand for loans increases

Loughton_Monkey

Bump!

More whinging from the CAB about payday loans:

Accounts drained by payday lenders, says Citizens Advice

Some borrowers of payday loans are having their accounts drained of funds because of automatic withdrawals by lenders, a charity has said.

Some lenders use continuous payment authorities (CPAs) - recurring payments from accounts - to make sure repayments are made.

But Citizens Advice said that 90% of these customers may have grounds for complaint about unfair treatment.

It analysed 665 cases of borrowers who approached the charity for help.

Rule change
CPAs are commonly used by gyms and magazines to take renewed subscription payments automatically.

They are also used by payday lenders to collect repayments directly from someone's bank account.

CPAs should not be used to take money without warning, but a lender has some flexibility over when and how much money they can take from a borrower's account.

However, since 2009, banks and building societies have been obliged to cancel CPAs when asked to do so by their customers.

In June, the City watchdog - the Financial Conduct Authority - said that some banks and mutual societies had not been doing what they were asked, forcing customers to cancel the payments with the lenders themselves.

However, banks have now promised to stop the payments when customers tell them to.

Citizens Advice chief executive, Gillian Guy, urged people to ensure they fight for their rights.

"People can feel powerless when unscrupulous payday lenders use CPAs to run amok in their bank accounts. Now, we're reminding consumers that they can fight back," she said.

"Misuse of CPAs can leave people without money to eat, pay rent or get to work, and can force people further into debt to stay afloat. If you've been badly treated, and the lender hasn't put right their mistake, then you can complain to the Financial Ombudsman."

http://www.bbc.co.uk/news/business-24045572

For those unfamiliar with 'Charityspeak', here are a few translations:

"having their accounts drained of funds" = seeing debits from their bank accounts as agreed and as rightly owed.

"unfair treatment" = having to pay back your Wonga loan.

"Misuse of CPAs can leave people without money" = if you don't have money, Wonga will lend you some, add interest, and take it back from you later, leaving you with even less money. Fairly obvious, rreally.

N1AK

Graham_Devon wrote: »

If you are on a tight budget, unknown expenses can catch you out.

We all have them. You can't assume that what goes out every month in general is going to always cover your expenditure.

For many people on a very tight budget, thinkgs like a MOT failiure, dentists, new tyres for the car, unknown travelling costs etc, money has to be found.

People renting may find themselves having to move all of a sudden for example. This isn't part of your outgoing direct debits each month.

Some months are just difficult and no amount of "to the penny" budgeting or your version of "education" will sort some people out if money is running extremely tight anyway.

I'd say it's a total lack of understanding of how some have to live that has you suggesting they just need some education. Maybe the tables could be turned? Maybe looking at how others outside of your privileged position live would be a good place to start....otherwise, to be frank, you are just talking down to people.

To pretend people can simply budget for every unknown is just as bad as pretending every single one of wonga's customers had no choice.

For some, just paying the prescription costs for antibiotics to treat an infection they didn't "plan for" can break them that month.

The majority of people using payday lenders have the financial means to avoid using them. Take the average Wonga borrower taking £300 every quarter: If they managed to save £5 a month then then by the end of the year they'd be £100 better off (assuming they use savings and interest avoided to borrow less). If they kept saving £5 a month and did the same then by the end of the second year they'd be £372 better off than if they'd kept using Wonga. By saving £5 a month for 2 years they'd be £372 richer and because they no longer use Wonga loans be another £300 (£25 a month) better off. How many of Wonga's customers do you really believe would find it impossible to find £5 a month?

You're right that there are people who disregard anyone in financial hardship and assume it is always entirely the individuals own fault. That extreme is also equally false. It is easy to sit here in our Ivory towers and assume that anyone who hasn't achieved the financial security we have is !!!!less and entirely to blame.

N1AK

wotsthat wrote: »

The muppets I know that have used Wonga wouldn't dream of using a loan shark if pay day loans weren't available. Instead they'd probably have to have a Saturday night in.

This is a very fair point and actually the only real argument I can see for some kind of restriction on PDL.

There will be some PDL customers who need the money sufficiently badly that they would, if PDLs didn't exist, use a loan shark or equivalent. I have my doubts about how many people are really in this category though.

What Wonga and others have done is de-stigmatise, simplify and increase access to lending. This has extended the market to include a lot of people who would be much better off if they didn't use them. This isn't in there best interest and it isn't in society's best interests either. For that reason I think we should consider a number of measures to restrict and discourage this market, while still leaving some capacity for short notice, high risk loans for the small proportion of users where that product is genuinely beneficial.

wotsthat

N1AK wrote: »

What Wonga and others have done is de-stigmatise, simplify and increase access to lending. This has extended the market to include a lot of people who would be much better off if they didn't use them. This isn't in there best interest and it isn't in society's best interests either. For that reason I think we should consider a number of measures to restrict and discourage this market, while still leaving some capacity for short notice, high risk loans for the small proportion of users where that product is genuinely beneficial.

That's the point I'm making. I think it would be to most people's benefit if PDL's didn't exist but can see a place for short term loans.

The rub is that if only the small proportion of people who find the product genuinely beneficial used them there wouldn't be a PDL sector to service them.