Payday loan chief denounces hidden fees of 'oligopoly' banks
Errol Damelin claims his high-interest loan business suits the needs of the Facebook generation
Sunday 27 February 2011
Errol Damelin, chief executive at payday loans business Wonga, has slammed banks as "an oligopoly" and defended his company's highly criticised high interest repayment structure as being part of the "Facebook generation".
MPs have attacked the short-term loans industry for its quadruple figure APR charges, which amounts annually to a typical 2,689 per cent in Wonga's case. The company has been highlighted because of its high-profile advertising campaigns and sponsorship deals, such as Blackpool FC's shirts.
Labour MP Stella Creasy has been Wonga's most vocal critic in parliament. She has called on the Government to set interest rate caps on payday loans so that people do not end up in financially crippling circumstances having only borrowed a few hundred pounds.
However, Mr Damelin said that the business is clear that it only lends short-term money – never more than 41 days – and that the interest is only 1 per cent a day if the consumer sticks to the one-off repayment plan. "APR is totally irrelevant and actually harms the consumer," he said.
Mr Damelin said that it was made clear from the outset that customers should only use loans for emergency, short-term cashflow needs and that there are "no tricks or traps". He argued this was in marked contrast to the high street banks. "There is an oligopoly in retail banking," he said.
"People have lost faith in the banks. They are not transparent. They may offer a loan at 5 per cent but they make money on late fees and hidden extras and sell their customers all sorts of other deals to make their money."
Mr Damelin said some payday loan companies are little different to loan sharks, but insisted that such accusations should not be thrown at Wonga. He said: "We don't operate from a PO Box like some of these faceless companies. We are proud of what we do and are right here in London. A regulated lender isn't a loan shark."
Mr Damelin said that unlike banks Wonga doesn't make money on those who can't pay back loans. He says fewer than 10 per cent of its customers haven't paid within 60 days. "We are aimed at the Facebook generation that needs 24/7 access and they are willing to pay for the convenience."
The Office of Fair Trading, in its review into the £7.5bn payday loans sector last year, did not recommend caps on interest rates. Mr Damelin welcomed the decision: "Caps on the interest charged will only encourage lenders to go underground. It would create loan sharks on our streets."
Wonga set up as the credit crunch started in 2007 and has traded strongly as people faced short-term cashflow difficulties. The company raised £73m this month for expansion.
- 1 Snoop Dogg and Jared Leto buy a stake in Reddit as A-list invests $50m
- 2 Prince held a Facebook Q&A and this is the only question he answered...
- 3 'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
- 4 35,000 walrus gather ashore on north-west Alaska beach 'for a rest'
- 5 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
Snoop Dogg and Jared Leto buy a stake in Reddit as A-list invests $50m
Prince held a Facebook Q&A and this is the only question he answered...
Brad Pitt, on the moment he completely lost his temper with Clint Eastwood's son
Cheryl Cole officially 'the most dangerous celebrity' on the internet
Ebola virus in the US: What are the symptoms, what is it and is there a cure?
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
The Osborne Ultimatum: Chancellor’s benefits freeze bombshell will affect ten million households
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Should gay sex be illegal? 16% of Britons think so
Mark Reckless becomes second Tory MP to defect to Ukip in a month
Benefits 'smart cards' plan revealed by Iain Duncan Smith to stop claimants spending welfare money on alcohol
- < Previous
- Next >
iJobs Money & Business
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...