Tag Archives: payday loans

I feel quite pleased that Wonga went into liquidation. I am sad for their employees (as we all have families to support) but I am sure the directors will walk away with their egos bruised and millions from ill-gotten gains. Companies like Wonga are effectively no more than legalised loan sharks.

Looking at a quick comparison between payday loans for short-term loans the APR varies from 500 per cent to just under 1600 per cent a year. A survey by the Royal Society for Public Health ranked payday loans as having the most detrimental effect on mental health well-being. There are nightmare stories of people who have up to 8 payday loans to service their debts. On average people hold three payday loans at a time. Agencies that support and assist people with payday loans relates to loans that are over 100 million pounds for well over one hundred thousand people. Those in poverty already pay a poverty premium (the poverty premium is calculated to cost a low-income family on average £490 a year) therefore reducing costs from any spend is crucial for them as it allows more cash in their pockets. Increased inflation and low wage increases hurt low-paid families disproportionately and they are the ones most likely to use payday loans.

We can learn from the US here; fifteen states have banned payday loans. Although, in the UK, we have capped loans I for one would be in favour of a similar ban. However, we need to tackle payday loans, excessive credit card rates and charges from unauthorised bank overdrafts (I remember that at one time a large high street bank was changing equivalent to 4,500 per cent APR for an unauthorised increase to an overdraft). Limiting the harm payday loans can do is now even more important because of increased wealth inequality and a shrinking welfare state.