Payday Loansharks, Don't Bother!!

With the price of living drastically rising, and wages only slowly increasing, UK citizens are turning in numbers greater than ever to payday loansharks to plug the gap! Between 1999 and 2009, the average personal debt rose by 158%, making it harder than ever for those already struggling. This is where the predators came into play, with Wonga offering loans with attached interest charges of up to 4200% (2013 figures), the public saw it as quick and easy cash. Months later when the loan wasn't repaid, unsuspecting customers were landed with a fat amount of debt, of which many could not afford. This is known as Usury, the crime of charging and unethical level of interest on a loan. For those in desperate need of cash, it was a temporary fix and easy to obtain, with no background checks, no security and no processing it was a gift - so they thought. Although, the question that should be asked is do these individuals bear responsibility for their indebtedness? should they not carry out their own due diligence before they invest?

Many argue that these loansharks target the vulnerable, but I think its more of a case of the customers not carrying out enough research into the investment. All the figures are sitting in-front of them, so customers should make themselves fully aware of the risk they are getting themselves into. Saying this, we should be steering away from a growth industry that exploits desperate people, its simply unethical!



It comes after Kane Sparham-Price's death that the FCA decided to intervene. The vulnerable teenagers bank account was drained after loaning money from Wonga, unaware of the extraordinarily high interest rates. Although Wonga did not act unlawfully, the draining of his bank account, leaving him penniless may have been a factor that led to his death. In 2014, the FCA requested information about the volume of Wonga's relending rates and from this saw that it was 'not taking adequate steps to assess customer's ability to meet repayments in a sustainable manner' (FCA, 2014). This highlights a fundamental PIPCO principal 'professional competence and due care' that has not been followed. Wonga was forced to write off £220 million of debt, some 330,000 borrowers who were in excess of 30 days in arrears. Furthermore, 45,000 customers were only asked to repay the amount they borrowed, interest free.



Wonga need to ensure that they lend affordably and responsibly in the future. Even though Wonga claim to carry out credit checks and use "behavioural algorithms" in order to find suitable clients, vulnerable people are still being targeted! With many reports of individuals unable to repay their loans, who were already financially unstable, sadly ending their lives. These people should have been blacklisted by companies like Wonga, to prevent them from becoming more financially distressed.


Why is it that those who are suffering financially don't just turn to banks for loans instead of these loansharks? Many may already have poor credit ratings and so banks will not loan to those when they may not see a return. This is a serious reoccurring problem which has only worsened after the financial crisis.


One final issue to address is the ethical dilemma raised when Wonga sent out letters to customers in order to intimidate them, even though they were completely FALSE! Absurd and unethical in my books!