It is time, the Wonga founder Errol Damelin declared just ahead of the payday lending sector being referred to the Competition Commission, for tough new rules “to keep the bad guys out” of his industry. Wonga is not the worst operator in the market. It claims to restrict the number of “rollover” loans that quickly accrue crippling interest; to not target the unemployed; and doesn’t even like to be called a payday lender, billing itself instead as offering short-term credit.
But Damelin and his peers haven’t exactly chosen to go into vaccinating orphans. “Wonga happens to be a poster child,” he says, which is one way of describing lifting your APR from 4,214 per cent to 5,853 per cent. “I genuinely don’t feel any hostility at all... We just need to stop looking in the rear-view mirror and look forward.”
Unfortunately for Damelin and Wonga, the view through the front windscreen is of the Archbishop of Canterbury. He vows to try to put payday lenders out of business, by using the Church to build rival, more affordable credit unions that will help people with money problems, rather than suck them into a “spiral of debt”.
As banks pulled back from offering short-term credit after the 2008 financial crisis, those without friends or family able to help, or possessions to pawn, have turned increasingly to the likes of Wonga, QuickQuid and The Money Shop. Wonga’s accounts show that it made pre-tax profits of £62.4m in 2011, more than three times the previous year. A stock market flotation north of £1 billion is mooted. Some recession – way to go Errol!Reuse content