16
Jan
10

Wonga – greedy and irresponsible lending

Wonga

Wonga

Remember when it used to take five days to transfer money from one account to the other? Remember all the irritated letters to TV and radio consumer programs? In 2009, the banks finally got their act together and it is now possible to transfer money on the same day. A good idea? I’d say so. However the law of unintended consequence has now kicked in with the arrival of Wonga.com.

I heard about Wonga on the radio yesterday and later saw their advert on the London Underground. Wonga are a company who will give you a short term loan and provide the money in around 15 minutes. The application is handled using the Internet via your PC or mobile phone. The customer uses a simple “slider” to select how much money they want to borrow and how long they want it for. Presumably credit checks are performed automatically and, if approved, the money is squirted into the customers bank account within minutes. A good idea? I’d say not.

The world has only just gone through a financial crisis which broke all sorts of records in all sorts of ways. The blame has been placed firmly on cheap and overly available credit. The result has been to put the western world in massive debt to a totalitarian and undemocratic Chinese regime.

While the experts rake over the details the public are disgusted by the greed of the banks and the incompetence of the organisations responsible for monitoring and controlling credit risk. Even Gordon Brown, the British chancellor on whose watch Britain’s economy was flushed down the toilet, claimed that he knew nothing of what was going on. While the world and his wife knew that anyone could get a “self certified” mortgage by lying on their application form Gordon Brown knew nothing. One wonders whether Brown knows about Wonga. Does he know that Wonga are targeting young people? Check them out on facebook and twitter.

British young people have a reputation for liking their booze. Now we have a company which is allowing them to buy credit when they’re drunk. You’re out with your mates, you’ve been in the pub all evening and now everyone is off clubbing but you’ve run out of cash. No problem, pull out your mobile and click, click, click you have £200 dumped in your bank account. What’s not to like?

Well how about a typical APR of 2,689%

Wonga is the epitome of greedy and irresponsible lending and one has to ask: Are our regulators asleep or simply stupid?
Let’s be clear who is behind these greedy, irresponsible people. Wonga list the following Joint Venture partnerships amongst their investors:

Balderton Capital
Greylock Partners
Accel Partners
Dawn Capital

Here are the people behind each partnership. I encourage you to click on the  link,  view the thumbnail pictures and then Email these greedy and irresponsible people and tell them in, polite but firm terms, what you think about loan sharks. If you know them then disown them.

Balderton Capital

Barry Maloney
Mark Evans
Bernard Liautaud
Tim Bunting
Dharmash Mistry
Jerome Misso
Roberto Bonanzinga
Andrew Nutter
Harry Briggs
Rob Moffat

http://www.balderton.com/our-team/

Greylock Partners

Arvin Babu
Aneel Bhusri
Tom Bogan
Asheem Chandna
Charles Chi
Roger Evans
Isaac Fehrenbach
Donald Fischer
Bill Helman
Reid Hoffman
Bill Kaiser
Ivy Li
James Slavet
David Strohm
David Sze
David Thacker

http://www.greylock.com/team/team/

Accel Partners

Kevin Comolli
Sonali De Rycker
Bruce Golden
Harry Nelis
Jeremiah Daly
Spencer Lazar

http://www.accel.com/people/index.php?group_id=122000

Dawn Capital

Josh Bell
Norman Fiore
Haakon Overli
Chad Raube
Glen Drury
Dr. Arjang Zadeh

http://www.dawncapital.co.uk/welcome/our-team/the-dawn-team.aspx

P.S. – I heard a guy on the radio from an organisation named Debt Wizard who seemed pretty knowledgable about all aspects of debt.

P.P.S – Here’s an interesting blog about Wonga targeting students and then lying about it.

02-04-2012 – Guardian article: Stella Creasy: ‘You can see a perfect storm coming’

01-03-2012 – Guardian article: Wonga: the real cost of a payday loan

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83 Responses to “Wonga – greedy and irresponsible lending”


  1. 1 Chris
    January 18, 2010 at 10:00 am

    There’s a fundamental flaw with this entire argument – APR and actual interest charged… Completely different hings.

  2. 2 jonesxxx
    January 18, 2010 at 8:51 pm

    Chris wrote: “There’s a fundamental flaw with this entire argument – APR and actual interest charged… Completely different things.”

    What an absurd statement! APR is the conversion of an non annual interest rate into an annual interest rate for the purposes of comparison.

    When one credit provider tells you he will charge you 1% a day over six weeks and another says he will charge you 5% a week over six weeks you can convert both to an APR and compare to see which is best.

    By attempting to discredit APR Chris and Wonga are undermining customers abilities to compare Wonga rates with other providers. They are trying to prevent people seeing that Wonga is an absolute rip off.

    Think about it.

    Wonga lend someone £100 and after 5 days they get back £110.70 (figure from Wonga web site). After that the money will be instantly lent out again. So if they lent out just the £100 again they’d get back another £110.70 after the next 5 days.

    There are 73 5 day periods in one year so after a year Wonga have got back £10.70 X 73 which is £ 781.10 !!!!!

    But it doesn’t stop there because the interest will compound so that they will lend out all those £10.70s and they in turn will bring in money.

    I think there is a fundamental flaw in Chris’s argument. He’s TALKING BOLLOCKS!

  3. 3 almaz
    February 6, 2010 at 12:02 pm

    >What an absurd statement! APR is the conversion of an non annual interest rate into an annual interest rate for the purposes of comparison.

    I used wonga.com loan ones last year, and I do believe they provide a very useful service for critical moments… I understand that APR looks ridiculous, but I agree with their explanations here: http://www.wonga.com/money/is-this-apr-expensive. You are talking about interest compounding, but there is no compounding in their loans. And unlike long-term mortgage loans which led to world financial crisis, this service doesn’t cause long-term financial obligations.

  4. 4 jonesxxx
    February 6, 2010 at 12:22 pm

    Thanks for the comment Almaz.

    Do you mind sharing the details? How much you borrowed, for how long and how much the fee was?

  5. 5 almaz
    February 7, 2010 at 4:03 pm

    £150 for 8 days, repaid £169. It’s not cheap, but a great price for their speed and convenience.

  6. 6 wongasucks
    July 11, 2010 at 5:03 pm

    Wonga employ dubious tactics including letters from fictional ligitation companies like tjhe non existing Chainey, D’amato and Shannon. They clearly are not regulated properly and therefore should not have a consumer license

  7. July 31, 2010 at 3:38 pm

    WONGA are Blackpool FC main sponsor, and there logo is to be displayed on their shirts in the premiership… bad times for the seasiders..…

  8. 8 Nicole Meade
    August 20, 2010 at 10:45 am

    Just my 2 pence worth on this topic – if you don’t like Wonga, there are ways for you to get access to other lenders without having to go through the hassle of spending a ton of hours searching. When I was short of cash and needed a short-term bridge loan, I checked out a few different loan brokers. I would recommend that you only use those that do not charge an up-front fee – that way you can get your cash sorted out before any payment is made for the service. That way, if it goes pear-shaped, you can always cancel the service before any money is exchanged. I’m not promoting them, but I used Loanfinder.co.uk and got a loan through Quick Quid for £450 which covered me until my next payday. I paid a small fee to Loanfinder and Quick Quid charged me £110 for their part of the loan. It was expensive but given my cash squeeze at the time, it served it’s purpose. Therefore, if I can avoid doing this in the future I will, but if you are stuck, it’s worth looking into.

    Good hunting,

    Nicole

  9. 9 Denise
    August 23, 2010 at 9:09 pm

    Wonga are the worst kind of loan sharks. Not only do they charge interest by claiming ‘there were insufficient funds in your account’, but they continue to try to add interest even when you have sent postal orders by registered mail, are rude on the ‘phone and even hang up when your legal representative tries to talk sense to them!!!!!
    Payday loans might be fine as a stop-gap, but try any firm but Wonga.com.

  10. 10 jen
    September 2, 2010 at 8:08 am

    WONGA>>> ong i am tryin to pay my loan early, website does not let you, noone on the other end of the phone total rip off

  11. 11 jen
    September 2, 2010 at 8:10 am

    I have been trying for 30 hours now my phone bill will be huge just hanging on listening to music

  12. 12 Lee Ashcroft
    October 1, 2010 at 1:23 pm

    I used wonga to get me through until payday. They were very flexible and I had the money within 15 minutes. I also saved £5.50 off the fee’s by using the promo code bsl822 :) I’ve used other payday loan companies before and had problems with them taking payments on the right days. Wonga was spot on. Promo Code: bsl822

  13. October 1, 2010 at 2:24 pm

    Al payday loan companies are loan sharks who prey on people who are vunerable and desparate. Avoid them at all costs and if you do use one please do not get stuck in a trap of rolling over every month. You end up in a downward spiral of debt at very high interest. Visit my webiste http://paydayloantrap.synthasite.com/ to see how avoid getting in the mess I did and how to work your way out of it if it is too late!

  14. 14 Dave
    October 6, 2010 at 1:52 am

    At the end of the day, you cant get cash for free, YES wonga charge over the odds, I have been with wonga for a few loans now with no trouble at all, They helped me when i needed it and even extended my loan for a further 30 days, i did all this online with no hassle at all.

  15. 15 jonesxxx
    October 16, 2010 at 11:19 am

    Today the BBC Radio 4 program Moneybox discussed payday loans. Their web site says this:

    “The Centre for Responsible Credit is launching a campaign for tighter regulation. It says too many people are taking out payday loans that they cannot afford – and it wants stricter controls on the industry like they have in the USA and Canada where these loans originated.”

    http://news.bbc.co.uk/1/hi/programmes/moneybox/9095731.stm

    You can listen to the program via a podcast available here:

    http://www.bbc.co.uk/podcasts/series/moneybox

  16. 16 Ross
    October 21, 2010 at 10:06 pm

    These payday loan companies are absolutely scandalous! OK we a=know that the APR argument is completely flawed because they offer loans over 1 month not over 1 year so the interest rate has to be higher. However. A loan of 400 pounds over 30 days will still require the customer to repay 500 pounds. Lets say for arguments sake that I took out a loan with a credit union for 2000 pounds repayable over one year I would most likely get an interest rate of 12% which means that by the end of the year I would have repayed back my inital 2k plus around 150 in interest (possibly less because the interest rate is only applied on the reducing balance) so an APR of 12 % on 2k doesnt mean I would repay 12% on all of the 2k I borrowed. It is 12% on what is left on the balance of the loan. Payday loans do not have a reducing balance, which is why the interest charge is ridiculously high and they also actively encourage customers to extend their loans, therefore increasing the balance and increasing the loan they can charge interest on.

    There is no denying that payday loans are handy, but when they offer them to people with no credit checks, up to about 75% of their take home pay, is it any wonder that their customers get into trouble paying them back? Think about it for a second. You are a bit short one month so you take out a loan of 400, you repay 500 on your payday, about a week after being paid you realise that you will need another loan this month so you use the same company again ut this time you need 3 weeks worth of money so you get a slightly larger loan of say 500, so your next payday comes and you have to repay 650 this time with the added interest. how long until you can only afford to pay the intrest back without clearing the balance? not long at all!! So you will essentially be repaying back a couple of hundred each month and never clearing the balance because if you did clear the balance you wouldnt be able to pay the rest of your bills and if you did pay the rest ofy our bills you would have to get another loan out! It’s a vicious circle that if you read around you will see enough people have fallen into and the payday c ompanies know this far too well but continue to lend. I think if they are irresponsible enough to lend to people without credit checking them first and making sure that they can afford to repay the loan ( and i don’t mean by asking how much they earn each month!) then they should expect to have people defaulting on their loans and making repayment agreements at 5 pounds per month over the next 5 years! Besides isn’t that what they are doing to their customers only in reverse?!

  17. 17 jonesxxx
    October 21, 2010 at 10:48 pm

    I hear you and I agree except for one point. You say: “we know that the APR argument is completely flawed because they offer loans over 1 month not over 1 year so the interest rate has to be higher.”

    The point of APR is to give a common measure. It does not matter if the loan is over 1 month or 10 years. The APR allows us to compare the price of the loan. Now, OK, it is true that if you are lending very frequently, say every week, then you may have greater overheads but not the diference between 8% and 2,689%

    A normal loan may cost you about 8%. Wonga costs you 2,689%

    THAT IS OUTRAGEOUS!

    Get this straight. APR IS a legitimate way to compare and Wonga charges are MASSIVE.

  18. 18 Paul Dawson
    November 23, 2010 at 8:55 am

    I borrowed from Wonga, received numerous letters and email threatening legal action when I couldn’t pay, they then started trying to take payments from my bank account everyday, ultimately my bank suggested a new card to ensure that they couldn’t carry on this practice, three months later, more theatening letters and low and behold, somehow they have managed to obatin by new card details, I hasten to add not from me. Their collection practices are dubious to say the least, possibly even criminal! I woudl not recommend payday loans to anyone and would say a BIG NO to Wonga.

  19. 19 almaz
    November 23, 2010 at 10:19 am

    >>when I couldn’t pay

    So you didn’t pay money back? Do you expect that a company that gave you a loan will not try to take money back? Banks will take your estate if you don’t repay their loans, and you are complaining that Wonga tries to take payments… sorry mate, but if I were you I would contact them once I have a problem and try to solve it instead of running away.

    P.S. I haven’t used them since last year, and at that time everything went extremely fast and smoothly. Hope they are still as fast, as for me they provide a really useful service

  20. 20 Tom London
    December 3, 2010 at 11:09 pm

    I can’t understand your train of thought either, Jonesxxx. Payday loan lenders provide loans to people whose credit history/profile is so messed up they cannot get an overdraft or a credit card to help them out if they run out of cash before payday. Therefore, the interest rate represents the risk associated with lending to that sector of the population.
    Also, the interest rate is disclosed upfront, people will know exactly what they will have to pay back and when. Payday loan lenders require applicants to be 18 years old and of sound mind. We can then safely assume that everyone applying knows exactly what they are signing up to.
    If we agree on the above, what you are really saying is that you/the government know better and everyone else is stupid and they should be told what to do, what not to do, where to borrow money from and at what cost. I think that if two consenting adults agree to a deal – for instance, one consenting adult lends another one £100 and to be repaid in a week with £10 interest – who are we to interfere and tell the borrower or lender what they should and shouldn’t do? I am sorry, but that’s communism – state interfering into free market and telling businesses how much they should charge for their goods or services.
    Also, going and exposing names of the people who run various companies, because they operate a legitimate business is probably a step too far. I am not sure if you would like for someone to run a whois search on your website and then run a voter’s roll search and came to your house (or sent you email) telling you how to run your business. You can’t blame other people for running a legal business that is profitable. What would you like Wonga to do? Start a charity and offer interest free loans to people with bad credit history? Maybe just give all their worldly possessions away?

  21. 21 jonesxxx
    December 4, 2010 at 7:17 pm

    The thrust of your argument is that any business which makes a profit and where consent is obtained from both parties should be legal, that no criticism should be allowed and that the owners of the business should remain anonymous. Anything else, you suggest, is communism.

    You seem not to understand what communism is and if we follow your reasoning then all electrical safety standards can be done away with, laws on prostitution can be abolished along with trade unions and consumer programs would be illegal.

    A typical UK high street rate for a loan is about 10%. Wonga charge 2,689%. This cannot be accounted for by the risk profile of the customers or the more numerous transaction costs. It represents Wonga’s ability to exploit people who cannot get loans anywhere else.

    You suggest that I have exposed the names of the people who run Wonga. I have not “exposed” them. Thankfully the UK is a regulated free market and so the owners of businesses are readily available. Your analogy with someone coming to my house is spurious. I have not identified the home addresses of the Wonga owners.

    You suggest that we should not be sending Emails to owners of businesses complaining about their companies. YES WE SHOULD. In a free market system we should be holding the owners of businesses to account.

  22. 22 Tom London
    December 5, 2010 at 12:02 am

    I would argue that typical UK interest rate is 10% – it is like saying that typical car in the UK costs 15k – some cars cost 8000, some cost nearly a million. Should we then ban the sale of Bugattis or Ferraris because they are expensive? How come a hot dog at a football game costs 5 times as much as in an Asda restaurant? Should they be banned as well? A bag of peanuts on a Ryanair flight costs 3 quid, or 50p in Tesco – let’s go and prohibit people who get hungry on an airplane from buying overpriced peanuts! Why a Breitling watch costs 5000 pounds? All it does is show time – same like a 5 quid cheap watch. Let’s start an email campaign – government should regulate the price of watches to protect the masses from paying too much!

    Bottom line is this: no-one is putting a gun to anyone’s head. Everything is, as you mentioned, regulated by OFT and charges/fees are disclosed upfront. If someone needs to borrow money, they can. If they don’t like the interest rate, they can go elsewhere. If they apply, all they have to do is repay the loan when they said they will. This way, they will avoid late payment penalties and interest compounding. It really is simple – service is offered, there is no obligation to take it, everything is clear and transparent. If people stopped taking payday loans, there would be no demand and payday loan companies would go bust. Maybe people should learn to manage their finances and not put themselves in a situation when they run out of money before payday? No, let’s blame legitimate businesses, it is easier…

  23. 23 jonesxxx
    December 5, 2010 at 11:23 am

    You say “If they don’t like the interest rate, they can go elsewhere”. But that is the point. They cannot go elsewhere as they have poor credit history. They are a captive market.

    I think the real difference between your view and mine is that you believe that someone with money (and power) has the right to exploit someone who has none. Whereas I believe that we have some responsibility for how our “system” works and should attempt to prevent exploitation.

    Not only does it rip off the consumer it has detrimental effects on the economy as a whole. For example it would have been useful if the UK had legislation like that in Australia which would have stopped banks lending house buyers more than the cost of their houses.

    Regarding the interest rate of 10%. I chose this figure by looking at top loans on web sites.
    It is not like saying that “typical car in the UK costs 15k” – That is absurd.

    uSwitch shows shows Nationwide 7.5%, Alliance & Leicester at 7.6%, Satnander at 7.6%, Sainsburys at 7.9% and Tesco at 7.9%. All figures APR.

    http://www.uswitch.com/loans/how-best/
    http://www.uswitch.com/loans/how-best/
    I’m sure there are others.

    I rounded these up to 10% for the comparison which is in Wonga’s favour.

    You comparison of Wonga with Buggatti does not work. Buggatti provide cars which are superior in quality but the money which Wonga provide is not superior to money provided by anyone else.

    Regarding the price of hotdogs at “Football games” and hotdogs in “Asda restaurants”. An odd comparison but yes they will have different prices reflecting their business model. But the price of the one at the football match will not be 200 times the price at Asda. If it were then people would be extremely pissed off.

    Your example of peanuts is more interesting. In your example Ryanair charge £3 and and Tesco 50p. I think you are under estimating Tesco and overestimating Ryan Air but even so there probably is a big disparity. Ryan Air’s business model is to have cheap flights and then charge over the odds for everything including peanuts. Personally I hate Ryan Air because of this sort of thing but at least you know that you got the flight cheap and you do have another option (Take your own peanuts). If you take a loan from Wonga you cannot justify it by claiming that Wonga are supplying something else that is cheap.

  24. 24 Tom London
    December 6, 2010 at 9:46 pm

    Well, here is the problem – being approved for a loan is not a person’s right, it is a privilege. Another person, based on the borrowers circumstances and risk, makes an offer the borrower is free to refuse. The interest rate reflects the risk – I can’t find it on google now, but I read somewhere that only half payday loans are being paid back on time – lenders have to spend hundreds of pounds in collection costs to recover the other half. Well, there you go – imagine what would the average mortgage interest rate be if 50% applicants failed to pay the loan on time.
    At the end of the day, the responsibility lies with everyone to manage their finances responsibly, make sure they stock up on peanuts before boarding Ryanair flight or make sure they don’t go and watch live Premiership game on an empty stomach. And failing that, if someone spends 3 quid on a stale airplane sandwich or pays 25 quid in interest on every 100 pounds borrowed, they have no-one to blame but themselves, NOT companies providing a service, however overpriced it may be. Everyone is responsible for their own actions and consequences of them. A consequence of being reckless with one’s credit history and living above one’s means is the fact that the only loan such person will be eligible for will be extremely expensive. However, that person is free not to take the loan – they can sell something, live on bread and water until the end of the month, go to work like the rest of us, maybe gain some marketable skills and get a better job, I don’t know. It is that simple – UK will be a lot better off if everyone does the above (gets a proper job, manages their finances responsibly etc) – I can assure you, payday loan companies will go bust in a week then. Until then, let market economy and the laws of supply and demand decide how much should goods and services cost.
    Here’s another idea – if you like deadbeat borrowers so much, why don’t you start a loan company (all you need is an OFT licence)? You can then charge as much as you want, even 0% interest – that’s market economy – you can put payday loan companies out of business in no time!

  25. 25 jonesxxx
    December 7, 2010 at 9:06 pm

    You keep saying that the interest rate reflects the risk. It does not. If 10 people borrow £100 at 10% then the lender should get £100 in income. If half default he gets £50. To make up the other £50 he would have to charge 20% not 10%. That is a hell of a long way from 2689%.

    I agree with you that the responsibility lies with everyone to manage their finances responsibly. So this means the lender as well as the borrower. So if someone has a history of not repaying loans, and you know this and you lend them money and they don’t pay you back then by your logic this is your own fault for lending them money in the first place.

    You say that a consequence of being reckless with one’s credit history and living above one’s means is the fact that the only loan such person will be eligible for will be extremely expensive. True but these are not the only people that are effected. People who are poor and desperate are also offered these loans.

    I think your view is just the simplistic right wing view. Everyone should look out for themselves and bollocks to them if they don’t. But very few societies take this view. Even the U.S. has Medicaid and you could argue why should decent tax payers be forced to pay for a lot of freeloaders on Medicaid? If they can’t be bothered to work and they get ill then that’s their problem.

    Your “it is that simple” is just a cliché. It boils down to the same discussion I had with someone about giving money to beggars. Personally I dislike giving money to beggars as I think a lot of them are freeloaders. Someone argued to me that they give to beggars knowing that a lot of freeloaders will get some of the money but that if he didn’t give then no money would get through to those who need it.

    I think that a balance needs to be struck between free markets and protecting the vulnerable.

    Your suggestion that I start a loan company and charge zero percent is ridiculous. If you believe in your ideals so why do you help anyone at all. Or maybe you don’t?

    I’ve got a question for you: When you have needed help did someone help? If not, should they have?

  26. 26 jonesxxx
    December 7, 2010 at 9:32 pm

    The real test would b to see the accounts of Wonga. To see how much profit they’re making. But they’re not publicly listed so the accounts are not published. As far as I know….anyone else know??

  27. 27 Tom London
    December 12, 2010 at 1:33 pm

    Hi Jones,

    You said: “I think your view is just the simplistic right wing view. Everyone should look out for themselves and bollocks to them if they don’t. ” – I disagree. I believe that those who can’t look out for themselves need and deserve help – this is what differentiates us from animals – we take care of our weak and elderly. But the help should not mean that the GOVERNMENT imposes arbitrary maximum prices independent private owned businesses can charge for goods and services they offer. If sonmeone needs help because they can’t manage their finances, the answer is not a payday loan, but a visit in Citizens Advice Bureau or independent financial advice. People who are on low income usually qualify for some sort of government assistance – working tax credits, housing benefit, jobseeker’s allowance etc. They can go to Salvation Army, get a free meal or a blanket or other charity and get some help, maybe even start selling Big Issue – but NOT TAKE A PAYDAY LOAN!!! That’s the whole problem – people think that a loan will help them financially. It may – if they can afford it. Also, guess who pays for the benefits and Citizens Advice Bureau – you, me and every business in the country that pays taxes. So, if you start telling businesses how much they can charge, they’ll just pack up and leave – this is XXI century, capital and workforce can now move freely around the world to another jurisdiction. As a consequence, there will be less money in the public purse and therefore less money for those who fail to take care of themselves.

    All I am saying is that we should let businesses do what they are good at – do business. Government should stay out of it as much as they can and certainly NOT tell businesses how to run their operations – if government knows so much about how to run a loan company, why don’t they start one themselves? People who are in financial dire straits should never ever seek help by taking a loan that will charge them 25 quid for every 100 quid borrowed, they should wake up, smell the coffee and seek independent financial advice, maybe go to charities for help or get a part time job (or start selling Big Issue, whatever). Payday loans should only be taken by people who understand what they are signing up for and are able to afford the repayment – let’s say someone on £30k pa salary who never bothered to apply for a credit card or an overdraft but needs £300 because their car failed MOT. Repayment is not a big deal – at £30k salary their net income is probably about £2000 a month so if they’ll pay off £375 in three weeks time when they get paid, it won’t break their budget. I think we can both agree to the above.

  28. 28 steve
    December 14, 2010 at 3:46 am

    Well, I can see a lot of good points here but do agree that in some respects the massive APR (in my opinion) really bears no relevance to this type of loan.

    If someone was to borrow, as said, £300 they would need to pay back £375 when they next get paid. Yeah it’s a high amount but it stops once the loan is repaid. Anyone signing up for this would be aware of this but if they were to default and take a whole lot longer to repay it then that’s when the 2689% really kicks in and puts them in trouble.

    I am in a bit of money trouble at the moment and am thinking about this kind of scheme as a quick fix but I am fully aware of the consequences of non payment. I do know that I can guarantee it will be paid on 7th January 2011 when I get paid.

  29. 29 JJ
    December 14, 2010 at 4:11 pm

    I was using Wonga ,started off ok they lent me £200 ,but then they kept offering more each month until my whole pay cheque was with them ,i would pay off one loan and have to take out a new one moments later.
    Stay away from Wonga if you can !

  30. 30 Tom London
    December 15, 2010 at 12:02 am

    Did they force you to take those higher loans? I mean, was there someone there with a gun or a baseball bat? I get credit card offers in the mail every other day, but I don’t go and apply for every card I can get, then max them out the next month and complain that credit cards are a scam…

  31. 31 dan meskell
    December 23, 2010 at 11:01 am

    Why do i get the impression that Tom London works for Wonga in some capacity!!
    Wonga are a rip off company. My wife has had her bank account cleaned out by them, and yet she has never been involved with them!!
    The police are now involved as they refuse to answer my emails.

  32. 32 jonesxxx
    December 23, 2010 at 11:09 am

    The thought had occurred to me. The off target sporting references and the name don’t help.

  33. 33 jonesxxx
    December 23, 2010 at 12:11 pm

    Tom

    You say that you “believe that those who can’t look out for themselves need and deserve help” This is refreshing but contradicts your previous posts where you have been quite harsh on your less well off “deadbeat borrower” brethren.

    You suggest that business should be free to trade in any way it wants and that we have government sponsored institutions to cover people in trouble. e.g. working tax credits and housing benefit.

    This is one theme that I am seriously opposed to. The idea that rich venture capitalists can exploit “deadbeat borrowers” and then leave the taxpayer to pick up the pieces is outrageous. A better idea would be to stop the exploitation at source.

    You say that if people find themselves in dire straits they should never seek help by taking a loan that will charge them 25 quid for every 100 quid borrowed.

    Ah, but they will. That’s the problem and you and I and Wonga know this.

    You say that “if you start telling businesses how much they can charge, they’ll just pack up and leave” and that capital and labour have free global movement. This is no true.

    While capital moves freely labour does not but there is something else that does move which is never mentioned by free marketeers: Markets.

    Markets are not mobile.

    If Nissan is selling cars more profitably in Australia than in the UK then pulling out of the UK will not increase their profits so long as they can still make a “reasonable” profit in the UK.

    Free markets are a useful ideal that I am broadly in favour of but too many people treat free markets as dogma that we should obey without thought. If we have not learned that in the past ten years then we have learned nothing.

    You suggestion that Wonga is for someone on a £30k pa salary who never bothered to apply for a credit card or an overdraft but needs £300 because their car failed MOT is disingenuous. Someone in that position should just ring their bank.

    I agree with you that someone with no debt, on a £30,000 salary who takes a £300 loan for 3 months and is charged £75 in interest will not break the bank.

    However, they will have been ripped off.

    I had set up an automated email-back service but this has played up and I have been emailing manually out of courtesy. I think that you are so interested in this thread and so no longer need to receive emails.

    It has been suggested that you work for Wonga. Do you?

  34. 34 jonesxxx
    December 23, 2010 at 12:30 pm

    Free tube on New Year eve sponsored by a company is becoming a bit of a tradition in London and it seems that Wonga are the sponsor this year.

    They’re getting flak from Walthamstow MP Stella Creasy.

    http://www.guardian.co.uk/politics/davehillblog/2010/dec/23/do-wonga-london-tube-ads-break-rules

    Seems to me that this demonstrates precisely the target audience for Wonga. Not people who have never had a loan and do not have a credit card but young people out partying who have had too much to drink.

  35. 35 dan meskell
    December 24, 2010 at 11:24 am

    Unfortunately this type of company has no intention of helping people with obvious money problems. Only keep throwing it at them. There are some very ill people out there, being made worse by these kind of scum!! Gamblers, alcoholics, drug addicts, etc.
    Will they try to help them??? A big nooooooooo!!!

  36. 36 Tom London
    January 1, 2011 at 8:44 pm

    No, I don’t work for Wonga, not that’s anybody’s business. Even if I worked for them, that wouldn’t change anything. I never leave my real email address – I don’t like to receive “courtesy” emails aka spam. If I am interested in following the discussion, I can google your blog.
    Payday loans are a lesser evil – better than your neighborhood loan shark with a pitbull and a baseball bat, definitely more expensive than a personal loan from a conventional lender. Their business model is to lend money at silly interest rates to people no other lender would touch with a barge pole. Those people are free to take them – or not, no-one is putting a gun to their head forcing them to do so. If you don’t like them, don’t take them – simple. They are legal and regulated – I don’t really have anything else to add. It’s not Wonga, Quick Quid or Cash Converter’s fault that some people, through their own deliberate actions, devastate their credit rating to the point where the only loan they are eligible for carries 3000% annual interest and doesn’t exceed a few hundred quid. Also, payday loans are for 31 days max – guess what, the end of the month happens 12 months a year and if someone cannot budget to make ends meet they only have themselves to blame. They can do a dozen of other things instead of taking 200 quid payday loan: get a job (millions of Eastern Europeans can find one, picking butternut squash, washing dishes or working as a hotel maid, how come someone born in the UK can’t?), go to charities and ask for a free soup, cut down on their spending (fags, booze, drugs), apply for benefits, ask their mum for a loan, sell something on eBay etc. People should take responsibilities for their actions, not looking for someone to blame – although obviously admitting that one is a loser is more difficult, it’s easier to point fingers blaming everyone else.

    “There are some very ill people out there, being made worse by these kind of scum!! Gamblers, alcoholics, drug addicts, etc.
    Will they try to help them??? A big nooooooooo!!!”

    Don’t make me laugh… Very ill people have cancer, MS, or swine flu. Gambling or drug/alcohol addiction is not an illness – there are huge signs on alcohol bottles asking people to drink responsibly, same goes for cigarettes and gambling websites. Those signs warn people of consequences of drinking/smoking/betting on horses/playing texas hold’em irresponsibly. There are even pictographs for those who can’t read showing what would happen to your lungs if you continue to smoke. Granted, there are no warning labels on drugs, but I think by now everyone has seen either Trainspotting or Requiem for a Dream and knows what will happen to to them if they keep injecting themselves with heroin. Again – I don’t think anyone put a gun to anyone’s head and forcibly stuffed them with drugs, alcohol or poker chips until they became addicted. People made certain choices in life, now they have to live with the consequences of their behavior. They have no-one to blame but themselves – unlike someone suffering from multiple sclerosis, Alzheimer, hereditary hemochromatosis or flu.

  37. 37 dan meskell
    January 5, 2011 at 8:07 am

    ‘Don’t make me laugh… Very ill people have cancer, MS, or swine flu. Gambling or drug/alcohol addiction is not an illness’

    If you think these are not illnesses, then you are living in cloud cuckoo land.
    Pray and hope that none of these befell your family , friends etc……cos then you’ll know what problems are!!

  38. 38 paula luqa
    January 12, 2011 at 2:06 am

    I have to say i do agree with tom ,i run my own biz and wow things are tough but i would rather sell my own body ,or sell the big issue guess wht ive done both ive been there .And i can trace why i ended up like that down to my own behavior .Im also a smoker and yes i can read and yes i do know it will kill me ,but again my choice Just as a drinker makes that choice and yes ive been their as well .But i blame myself i got myself there and i had the depth to stop.But i certainly wouldnt stop people buying any drugs bee it alcohol ,ciggies ,or weed .We are blessed with free thought ,listen only an alcoholic can stop drinking nobody can stop him.
    Being selfemployed i have never used these loan companies but i was offered the chance to get involved about 2 years ago as a backer in a similar company god i wish i had .The choice to borrow even at 3000% is better than no chance .I and others have been in this situation before and without a decent credit rating and at a bad time £300 would be usefull but only once if you have to keep on borrowing then hey you really are in DEEP trouble so just STOP think and cut down earn MORE ,dont drive for a month smoke tobacco rather than ciggies

  39. 39 Liudolfus
    January 15, 2011 at 7:44 pm

    Thanks for the well-written blog and for the excellent contributions made in the debate in the comments section.

    I find the argument that free-markets should be allowed to operate with minimal oversight and regulation because “nobody holds a gun to the consumer’s head” to be of the crassest right wing kind.

    Ultimately such arguments would have society not function as western society as we know today at all but devolve into a free-for-all anarchy where money is the only arbiter: some kind of corrupt banana republic. Free markets of this starkness contain huge hidden costs in the form of unmanaged economic risk, not to mention human costs in deterioration of services such as health care, which in turn carries further economic cost.

    Free-marketeers of this ilk do not understand that untrammeled financial exploitation and extreme laissez-faire dogma ultimately is bad economics for everyone, since the rich can only get richer at the expense of the poor and eventually the poor get so poor that the rich can no longer get so rich. Would Bill Gates be as rich as he is now if there was no middle-class that can afford to buy PCs needed to run Microsoft software?

    Moreover the idea that the government cannot make good and sensible regulation merely because it is the government is laughable. I vote to elect a government that does regulate markets effectively. If tighter regulation of companies like wonga were to be made a campaign issue I would vote on that too.

    To hate regulation because it is regulation is inane. Regulation can be good regulation or bad regulation, but to argue that regulating is bad in principle is wrong. On the contrary, regulation is an important and vital part of a proper functioning economy. The only question is how and what to regulate.

    It seems to me to be pretty obvious that regulation of lending and borrowing should generally be a well-regulated area of an economy. The economy’s current troubles are caused by a lack of regulation in this area. Really anyone who thinks now that something like wonga should not be better regulated is a fool who has slept through the last 5 years.

    Also see this as a way to do what wonga does and still make a profit: http://www.nytimes.com/2011/01/15/opinion/15yunus.html?_r=1&hp. It basically sounds like some kind of credit unions.

    Credit unions could do what wonga does but wonga uses an aggressive marketing campaign to exploit a gap in an under-regulated area of lending.

  40. 40 SS
    January 17, 2011 at 6:11 pm

    wonga are not honest at all, they only want to corner you and charge you ridiculous interest amounts. i borrowed £520 and now they claim i owe them £950. they said they would not charge me interest cause i’m having financial difficulties. The lady i spoke to asked me to call them today to make a payment of £80 to extend my loan and i would not be charged interest and they would come to a payment plan arrangement with me only if i called. So i tried calling them all day, spent £20 listening to monotonous elevator music. They never picked up or got back to me although i contacted them through the website several times asking them to call me. They never contacted me and never answered my calls on purpose and hence they eventually forced me to make the automated payment online because it was almost 6pm and no answer. So, after making the payment online, my payment has been inflated by £200! my advice is never to use wonga, too much hidden costs. They are thieving.

  41. 41 SS
    January 17, 2011 at 6:13 pm

    I agree WONGA.com is Irresponsible and VERY VERY GREEDY! AVOID THEM AT ALL COSTS!!!

  42. 42 Tom London
    January 19, 2011 at 12:57 am

    No-one is stopping credit unions from offering payday loans to clients and charging them 9% APR instead of 3000% (that’s the “average” APR shown above by the kind owner of this blog). Let’s examine that business model: an applicant needs to borrow 100 pounds until payday, in 30 days time. To arrive at 9% APR the maximum interest they can charge on a £100 1 month loan is – attention – 71 pence!!! Don’t believe me? Check this APR calculator http://www.prudentminds.com/apr-calculator.html I just found it on Google – enter the loan amount £100, 1 repayment of £100.71 and voila – APR is 9%.

    Perfect – they credit union has just earned 71p. Let’s say they have a £1mln a month to lend – that is 10,000 £100 loans. In a month, they have made a £7,100 in interest, assuming everyone pays the money back at the end of the month (highly unlikely, they’ll be lucky if they see 50% back without chasing debtors, but let’s leave that issue aside for a moment). In the meantime to handle 10,000 applications they have to employ, conservatively speaking, at least 10-12 customer service advisers plus a manager or two. There are 20 business days in a month, so they will do 500 loans a day, let’s say an average consultant will spend 10 minutes processing each loan application – they will be able to process 6 an hour or about 50 a day – that would be the target. You have to have an extra person or two to allow for sicknesses and people having lunches, fag/toilet breaks during the day. So, 12 customer advisers working for £6 an hour equals monthly wages of roughly £12,500 plus two managers and you are looking at a minimum £16-17k in staff wages a month alone. They need some office space as well – 15 people will need a minimum of 10,000 sq ft office, which will cost them a minimum of £4-5k a month in Scotland or Northern Ireland (including business rates) or ten times that in London. They also need telephones, internet, computers, stamps – altogether, back of the envelope calculation, a minimum of £50k a month, probably a lot more. They will probably need collections dept, IT people, HR dept, own servers, lawyers, accountants, auditors, compliance staff, marketing dept etc – in fact, the cost of running the business like that may be 4-5 times more than £50k a month. Yet they only charge 9% APR to please the “champagne socialists” and earn £7100 a month on every £1mln they lend – it they lend more, they’ll need more staff and more office space etc… So, wake up, smell the coffee, use a brain and a calculator before you start telling businesses how to operate and how much should they charge for their services…

  43. 43 jonesxxx
    January 19, 2011 at 6:17 pm

    There is a form of argument known as straw man. It works like this: Person A states something as their belief or as true. Person B takes an argument similar to but not the same as the argument stated by Person A and debunks it. The casual observer then thinks that Person A’s argument has been debunked when it has not.

    This is what you have done.

    The argument is not that Wonga should charge an average APR. (Haven’t we been through this already?) They have more frequent transactions and so this must feed into the costs. The argument is that they charge far too much and are irresponsibly targeting the vulnerable.

    So instead of allowing them a profit of 71p let us say that they could take a profit of £10. 10% over 1 month would make an APR of 213.18% – Still way way short of the whopping APR of 2,689% which they do charge.

  44. 44 Tom London
    January 19, 2011 at 11:37 pm

    I just referred to your point above where you said that the average APR is 10%, although technically speaking you never said “payday loans should charge max 10% APR”. I may have, mistakenly, assumed that this was what you advocated – if you didn’t, fair enough, I retract my statement. £10 interest on 1 month £100 loan is indeed 213.18% APR, but that is a lot further away from 9% than 2700%. The APR increases according to geometric progression rather than arithmetic one due to the fact that the APR calculation assumes the interest is compounded every month – which is an incorrect assumption with payday loans, because you can’t get a 1 year payday loan. I am sure you understand it, but as the recent moneysavingexpert poll suggests – http://www.moneysavingexpert.com/poll/14-12-2010/whats-fair-interest-on-a-payday-loan – majority of people cannot comprehend the difference between interest charged and APR: 50% of people said fair charge is £10 for £100 borrowed yet 42% said APR should be no more than 10% – seems like most of the voters were fast asleep when they had math in school. And this is the real reason behind the recent hysteria surrounding payday loans – as the above poll shows people think that if the APR advertised is 2659% (or whatever it is) then someone borrowing £100 will have to pay back £26,000 in a month. This is also further exacerbated by accounts of people who took the loans knowing they will not be able to repay them on time and then were totally surprised when the lender acted to collect the debt, charged them penalties, sent bailiffs, registered CCJs against them and attempted to collect payments from their bank account.

    £10 per £100 borrowed is not really that far away from what lenders charge – Quick Quid for instance charges £20 per £100 borrowed (if you get excellent credit score) and that includes the money transfer fee (which Wonga says is £5.50). Most people applying for payday loans want the money on the same day, not in three to five business days and banks charge flat fee for same day transfers (it would be fairer if they charged it as a percentage of the transaction instead). On the other hand, is it really not better to leave it to the market rather than having politicians (or people who can’t count) telling businesses and consumers what to do? I am certain, that as the time goes by and competition increases payday loans will get cheaper, fees will drop and more expensive lenders will be pushed out of the market by cheaper ones. It happened in every other industry, I can’t see a reason for it not to happen in this instance…

  45. 45 jonesxxx
    February 14, 2011 at 5:51 pm

    Here is a poignant search term which was used to get to this article today:

    “how to stop son borrowing from wonga”

    It’s a good question.

  46. 46 PLoomy
    February 15, 2011 at 9:15 pm

    I’m disheartened to read some of the comments here.

    Everyone who takes a loan out has a financial and moral obligation to repay it and the people here who are complaining about being chased for repayments are ignoring these obligations.I’ve used Wonga on a few occassions over the past few months – borrowing between £100 and £300 each time and paying it all back on or before the payment date.

    Likewise how many of the people here who claim such short term loan businesses prey on the vulnerable have direct personal experience of using a payday loan company & know who they lend to and how they operate?

    I am neither an alcohlic, drug user, vulnerable, desperate or stupid person – all of which people here have quoted as being the customers of companies like Wonga. I understand and expect to repay my obligations when they are due. Our credit rating is poor because my husband is not working having been made redundant after 34 years in the same job for the same firm. Our cashflow is, therefore, tight at certain times of the year and companies such as Wonga provide a service we find useful.

    I’m an adult and would not accept anyone telling me I could not have a glass of my favourite red because the % rate (at 14%) was above the standard the government uses to set reccomended daily units of intake (9% to 11%) so why should anyone else apart from my lender and I agree an APR?

    Sadly there will always be a proportion of people who have debt issues – there always has been,it’s not new (there’s that proverb – neither a borrower or a lender be) – and advice and support should always be available to those in need, but without taking away choices from the remainder of the population.

  47. 47 jonesxxx
    February 15, 2011 at 9:25 pm

    You seem to be suggesting that if the government recommended a max 1500% APR and other companies offerred this then you would still prefer to use your favourite Wonga?

  48. 48 jonesxxx
    February 15, 2011 at 10:18 pm

    I just came accross a blog named: http://www.wongascam.com/

    What a very odd blog. If one searches for Wonga on Google the first word that users have entered after the word wonga is displayed and that word is “scam”. This blog has taken the word wonga and scam and made a blog out of it with just one post effectively making this one of the first sites one hits when one types “wonga scam”.

    The single article by an unnamed individual pretends to give a dispassionate account of his “scouring” of the web to answer the question is Wonga a Scam?

    The first evidence we get from this scouring is from Wonga itself stating what a pay day loan is. Secondly we are told wonga have a license. Then we are told that the author is intrigued by some satisfaction ratings attributed to an “online customer survey September 2009” but with no link is given.

    The author goes on to spread confusion over APR stating “So as APR is an annualised measure that wasn’t designed with short term loans in mind”.

    No, APR was not specifically for short term loans. That is the point. It was designed so that loans of all time periods can be compared against each other, whether annual, monthly or daily.

    The author goes on and states : “The larger the APR the more expensive a loan, right? Wrong. It’s a common perception, but as pay day loan companies have a flexible approach to short term credit the opposite applies.”

    So the author is implying that The Larger the APR the less expensive the loan is! – This is obviously not true.

    The argument over APR is a red herring. The author goes on to list APR rates for different time periods but this merely show that Wonga charge a larger APR for shorter time periods.

    The author makes absolutely no attempt to investigate Wonga but merely lists the company line.

    Obviously Wonga have set this up to try and combat the bad publicity.

  49. 49 PapaJoe
    February 27, 2011 at 8:20 pm

    Hi. My son, 24, naievely took out a Wonga loan in Dec 2010 to buy some clothes and get him over Christmas. He would have been able to pay this off within the agreed 30days except that he was laid-off from his job. That was December and his loan of 500 has gone to 980 two months later, even though he has been paying 200 per month. He is in a bind – I can’t afford to help him out and because he is unemployed he can’t get a more reasonable loan. wonga won’t even discuss a payment plan or lower interest rates. I know all the arguments about not taking out a loan if you can’t afford it – the problem is that there is absolutely no flexibility with Wonga, even when a person’s circumstances change. Previous generations talked about money lenders in hushed tones for a very good reason. While they would have some customers who were in a position to pay back their loans within terms, the ones they really loved were the poor sods who were in desperation and took delight in piling interest on top of interest. Wonga and their shareholders and those who man their telephones should be absolutely ashamed of themselves for being part of this legalised extortion.

  50. 50 Lynne Gray
    March 10, 2011 at 6:57 pm

    Its not that I dont agree with all the comments above and the situations people have been in.

    I have to say Wonga have been a lifesaver for me. Not to go clothes shopping but unexpected car breakdown 5 days before payday with £50 in the bank account. Borrowed £300 for 5 days which cost me £20 in interest. If no car wouldnt have been able to go to work so considerable cheaper than not being paid.

    I’ve used then on another occassion where I made a mistake with my finances and realised I would go into an unplanned overdraft the following morning. Borrowed £150 9pm at night (at for 3 days at a cost of £10 – well for a start the bank charges would have been £30 plus interest so condsiderably cheaper.

    If used responsibly and as an emergency then they are lifesavers and save money in the long run.

    Lynne

  51. 51 jonesxxx
    March 20, 2011 at 5:33 pm

    I mentioned a site named http://www.wongascam.com before.
    This site now links to a site named http://www.wongascam.com which claims to present information on pay day loans. Most of the blog articles seem about wonga and the About section identifies the author only as “Rob”. Rob eh? Good name for an industry which charges 2,689% APR interest.

    Could this Rob in fact be Bob? Could it be Bob McNicoll who worked “with one of the leading payday loan lenders rebuilding their website and loan application process”?

    http://ezinearticles.com/?What-Is-APR?-A-Simple-Explanation&id=5570714

    If Rob is Bob then he seems to make a bit of a career out of promoting payday loan companies

    http://www.articlesnatch.com/topic/wonga

  52. 52 Joz
    March 29, 2011 at 2:28 am

    This is a great debate – enjoyed reading it. My two pence below:

    The math is important (gets us away from the more emotional issues!). Theres a lot in the debate above about aprs and what is appropriate return for a given risk. Lets run this to ground because Jonesxxx I think you are saying that Wonga should be compensated for higher processing cost per loan and for higher risk but the incremental rate they charge (2000+% vs. 10%) over high street banks overcompensates.
    Jonesxxx your post of Dec 7 gives the following example “If 10 people borrow £100 at 10% then the lender should get £100 in income. If half default he gets £50. To make up the other £50 he would have to charge 20% not 10%. That is a hell of a long way from 2689%.”
    These numbers are not right actually. It works like this:
    10 borrowers of 100 pounds @ 10% interest = 100 pounds of interest income
    if 50% default the bank/payday lender loses 550 pounds from defaulting customers. This is because they don’t get the 500 (100×5) pounds of loan principal back from these customers nor the 50 (10×5) pounds of interest from those customers.
    Net position for lender is 50pounds interest income collected less 550 pounds of defaults = a net 500 pound loss for the lender

    a 50% default rate seems high but you can see from the math in the above example that the lender loses money even if only 10% of the loans default (and we haven’t even counted processing costs and overheads yet). On Wongas interest the math works as follows:

    ASSUMPTIONS
    10 x 400 pound loans
    avg loan term = 30 days
    fee and interest income on 10 loans (from Wonga slider) = 125pounds x 10 = 1,250 pounds

    In the above example if 30% of the loans default Wonga loses money.

    1,250 interest income collected less (3x 125 of interest) less (3x 400 pounds of principal) = a loss of 325 pounds to the lender

    This is (unfortunately) the economics of the payday loan market – high levels of default and high processing costs require high interest in order for the lender to make money.

    Question I have for Jonesxxx is as follows: is there a level of profitability that you think is fair for lenders (be it Barclays, Wonga or anyone else) to make and if that level of profitability results in an APR of say 2000% would you be supportive of them offering the product to the market or do you think the regulators should stop them?

  53. 53 jonesxxx
    March 29, 2011 at 8:23 pm

    Joz

    Thanks very much for the feedback. Yes you’re right I made a BIG MISTAKE in my example when I forgot to include the principle.

    I don’t agree that Wonga “lose” the interest that they do not get when a lender defaults. They should be borrowing at much better rates. I do think that APR is relevant as, though the punter may not pay this the money is loaned out again and therefore compounds.

    However, you’re right, my figures were way out and this makes a big difference.

    So I took your figures and did some more calculations

    Given the 10 * £400 loans totalling £4000 I have calculate that if we have 30% default rate, as you suggested, Wonga lose 8.13% per month.

    So it depends on the rate of default. Wikipedia states “based on the annual reports of publicly traded payday loan companies, loan losses can average 15% or more of loan revenue.” I think that this may be for the U.S.A.

    At 15% default rate and your figures I calculate that Wonga re making 11.56% per month or %271.62.

    Now this is not nearly as bad as I had thought but it’s still a bloody good profit.

    Rate of default 15.00%
    Repaid Total £4,462.50
    Return £462.50
    Shortfall £787.50
    income after investment £462.50
    Monthly interest achieved 11.56%
    compounded annual 271.62

    Which brings me to your question:

    “is there a level of profitability that you think is fair for lenders …. to make and if that level of profitability results in an APR of say 2000% would you be supportive of them offering the product to the market or do you think the regulators should stop them?”

    My article was entitled “wonga – greedy and irresponsible lending”.

    I had been annoyed at two aspects to greed with Wonga. One was high interest rates. You have shown how these are not so high as I’d thought but they’re still “probably” bloody high.

    The other aspect of greedy is the idea that there is a credit crunch on and we’re a bunch of venture capitalists with stacks of cash, let’s lend it to the poor bastards who are now having trouble getting credit.

    This also feeds into the idea of irresponsible. Deliberately targeting people who are obviously bad at handling their money and can go nowhere else is bound to lead some of these people into further debt. I’d also point out that the borrower who does repay his loan still pays the massive APR which I had originally thought. It’s just that Wonga do not pocket so much.

    The profit level does seem to hinge on their level of default.

    I am not going to pick a profit figure out of thin air and state that above this is unacceptable.

    Some people have posted that these loans are helpful to people who are strapped for cash but while Wonga may not be making the ludicrous profits I had thought they are “probably” making a very very good profit and they are targeting targeting the people when they are most vulnerable.
    e.g. New Year’s eve revellers on the London underground.

    If they set up a deal with a bank and people were forced to show up sober to collect their money I might be more sympathetic but then they probably wouldn’t get so many transactions.

    So I still think they are greedy and irresponsible.

    Thanks for the input though. It has brought some informed analysis to the debate…….maybe you have more…I’m open to criticism.

  54. 54 Joz
    March 30, 2011 at 3:10 am

    Interesting point you make on “showing up sober” to collect money. Finland has had a rising personal debt problem partly as the result of sms loans (text some basic info and they fund your account in minutes) that exploded in popularity a few years ago. There is a push by consumer advocacy groups and some MPs there to ban their use between 11pm and 9am (or at least not allow funds to be deposited until next morning). I dont know whether this makes sense or not (maybe) but I do agree there is a big responsibility on lenders to be responsible and that responsibility increases when you are talking about providing instant (impulse) credit.

    In terms of your question on further analysis – here’s a few random bits of info based on my research in the payday lending sector

    1. Payday lenders the world over seem to charge approx. the same rates. If you look at rates in US, Australia and UK there are lots of players and they all seem to be charging between 25% and 35% to borrow for 30 days. Credit is a commodity and there are a lot of players in each market so youd think if it was profitable to lend at rates lower than this someone would be doing so
    2. There are a few listed players in the pawnshop/pay day lending space in US and one in Australia that can give us an insight into the financials of the business (I say insight cause its complicated by fact that pawn operators have physical stores and many operate franchise models so its not a perfect comparison). CashConverters (listed in Australia) for example charges 35% for a 30 days loan (so more than Wonga) and they make a net margin of about 15% p.a. So its a profitable business but they are not making a “super profit” its about the same as high street banks
    3. The UK Office of Fair Trading produced a detailed paper on the payday lending/pawn broking sector last year after a year long review http://www.oft.gov.uk/news-and-updates/press/2010/63-10. Theres a small set of recommendations they make but generally didnt recommend more regulation or interest rate caps for fear that capital to this sector of the market would dry up completely if they did so. There is some evidence of this in US where some States last year introduced interest rate caps resulting in licensed lenders pulling out with low income earners now having only black market sources of credit.

  55. 55 jonesxxx
    March 31, 2011 at 7:44 pm

    Interesting stuff.

    Yes, a few curbs on when the loans take place and the money are delivered could be a good idea.

    One thing I’d omitted in my last calculations was to allow Wonga to cover their costs but hen I have no way of knowing what they are.

    One thing occurred to me and that is that most of the posts here talking about Pay Day loans but I’m not sure that is what Wonga are promoting themselves as. My impression is that they advertising convenience more than lending to people with poor credit ratings. If poorly rated customers were a minority then presumably their default rate would be less so their profits higher.

    On Radio 4 this morning Evan Davis was suggesting that with regard to the Irish bank debt crisis perhaps a soem kind fo default would be advantageous. He suggested that the lenders should bare some of the burden.

    It has occurred to me before that companies who lend to high risk individuals (or companies) should not be too self riotous in chasing their money when the borrow cannot pay. But as you have suggested, Wonga merely factor that into their business model.

    My views on drugs and alcohol are fairly liberal. I don’t like the idea of outright banns on consenting adults doing what they want. However, though I might be supportive of the legalisation of cannabis, I would have strict controls on it’s sale and not allow large corporations to run mass advertising campaigns promoting cannabis to the vulnerable.

    Perhaps we should think of debt in the same way as we think of drugs?

  56. 56 lisalovesit
    April 2, 2011 at 3:13 am

    i used the promocode scv271 when i applied for my wonga.com loan and it took £5.50 off the bill, ive passed it to a few friends since and it still works so feel free to use it anyone thats thinkin of applyin.. wonga do as they promise, the moneys in ur account within the hour, they let you pick how much u wanna lend and when u wanna pay and ur agreein to a price. as long as you pay it back on the promised day you shouldnt have any problems

  57. 57 Sarah
    April 11, 2011 at 12:55 am

    I would highly recommend Wonga.com to anyone!!!

    Its really good for if you need cash fast, they put it in your bank without 15min!

    I have tried a few other different payday loans and I have either been ripped off and its been very expensive.

    I have used wonga about 4-5 times now and I have never been let down.

    If you decide to use wonga, use this promo code and it takes £5.50 off your balance.

    Promo code: hlk191

    I used it and it worked for me!!! :D

    Happy Loaning! lol

  58. 58 Paul P
    April 20, 2011 at 8:37 pm

    Wonga’s APR may appear high, but unlike other Payday lenders there’s more flexibility. You can choose the amount borrowed down to the nearest pound together with the number of days you want it for. For example, if you took £400 from Wonga for 8 days just before payday, then you’d repay £437.50. Other payday lenders charge a flat rate of 25-30% whether you take the loan for 1 day or 31 days, so with them you’d repay up to £520. Quite a saving. So used sensibly, they can get you out of a financial hole for considerably less than other payday lenders. I’m not saying Wonga are perfect – they’re still expensive – but they’re certainly a better bet than some of the other short term lenders out there.

  59. 59 Ramsay D
    June 24, 2011 at 9:40 pm

    if ya do not pay back on time, then ya running into trouble.. I have never had any problems. They do as
    promise, pay money into ya banks acc within minutes..

    They txt you “thanks ya paid on time as promised” all done, but I JOINED UP WHEN 2K+ % AND NOW 4K+%??

    Maybe they got greedier?

  60. 60 paul
    July 7, 2011 at 11:40 pm

    A loan shark – appalling that we can do this to our fellow humans and that our politicians consider it acceptable. It shows just how desperate some poor people are. Shame on you those in authority if you care.

  61. 61 jo
    July 22, 2011 at 1:32 pm

    I personally say fuck the lot of them, iv had a few wonga loans and always paid them back no problem then I discovered a little gem of info that there is no lawfully binding contract we just think there is. dont pay them back go into default then when they send you a letter, write back asking for the following:
    1. Validation of the debt (the actual accounting), and
    2. Verification of their claim against you (a sworn affidavit or even just a signed invoice – signed is important!), and
    3. A copy of the contract binding both parties.

    There is nothing they can do because they operate fraudulently just like every bank, loan and credit card company.

    Try it and see if it works

    Peace

  62. July 23, 2011 at 5:01 pm

    All interesting stuff here. I can justify my opinion through having stupidly taken 64 individual loans in 18 months from a dozen different lenders. And I am also man enough to admit it was a massive mistake and I must blame myself for it. However, the fact is the entire industry is a shambles. Granted, in theory payday loans can work and sometimes do work (on occasion), forget APR nonsense, if somebody borrows just once and repays on time then they really havent paid that much for their troubles. The real issue is the repeat customer and spiralling debt concerns. How many people defend payday loan companies by stating they used them once and it was fine. No, never, its ‘ive used them several times’ or ive used them 5 or 6 times. What is supposed to be a one off loan as an emergency fix never ends up that way. If someone is constantly borrowing from payday lenders then they are not in complete control of their finances and quick and easy credit is not the solution. Then there is the situation of rollover loans, how many times should you be allowed to rollover a loan month after month before the loan company should step in to say hang on, theres something not right here. But then again why would they, theres no money in it. The payday lending model needs people to come back for more, one loan just doesnt do it for them. The entire system needs to change, rollovers banned, cooling off periods between borrowing, better credit checks – how many of these sites application forms ask one single question about other financial commitments! Mortgages, phone bills, gas bills, travel cost, anything!?!?! Hardly any. The industry must be changed for the sake of the people too naive and desperate to help themselves, which is why I have released a book, namely ‘when payday loans go wrong’ by Steve Perry and I have also just launched a campaign online to rid us of this menace, hope you dont mind me listing http://www.saynotopaydayloans.co.uk – I would appreciate people viewing it and signing the petition etc. It is essential we act now before it is too late. JonesXXX thanyou for posting this article. I have an absolute mountain of evidence against the industry, if you want to work with me moving forward on it, give me a shout, the email contacts on the website.

  63. 63 hacked off
    July 24, 2011 at 10:34 am

    i am ****ed off to the back teeth with a stupid wonga.com advert on every ****ing webpage i visit. please everyone in the world please take out a 400quid wonga.com ( attached to a bank account you can close shortly after aquiring the loan ) and never pay it back. then hopefully they will go bust and stop flooding the internet with their crappy patronising adverts !

  64. July 24, 2011 at 5:22 pm

    hacked off …. come to my site http://www.saynotopaydayloans.co.uk – sign the petition and keep an eye on things to develop, i’m going to be taking Wonga and the rest of the industry head on.

  65. 65 J.
    August 18, 2011 at 9:50 am

    If you don’t like Wonga – simply don’t use them! Good that there’s a choice, so that those that need short term loans can actually get access to loans rather than being shut out from the possibility or having to seek illegal loan sharks instead of legal ones. It’s easy to say for people with plenty of access to cheap capital to be dismayed by companies offering loans at high APR. In socialist nations like France and Belgium, people are simply shut completely out of the market – max loan rate in Belgium is ca 12%, thus everybody gets rejected unless they have a perfect profile, basically a profile of a person not needing any unsecured loan. I’ve personally borrowed money at 35% APR to start a company, and have no regrets. No bank would offer me any loan, so my credit cards was the only way. If 4000% APR was the only way, I’d still do it – when the loan is short term, high APR can be acceptable. If you look at paying £20 for borrowing £100 over 2 weeks – it may for some people be acceptable – but it’s 13,104% APR! Repr. APR is a good measure to compare costs, but as we’re talking about small loans over short time, the APR looks funny.

  66. 66 J.
    August 18, 2011 at 10:00 am

    Companies still have costs to cover, they have to do marketing so people become aware that they have product to offer. Typically this can cost £10-20 for the company, they also need staff to handle their business – thus they will have costs of above £20 for every new client they get regardless of size of the loan. If they were going to offer a “decent” rate of only 30% APR instead of an obscene rate of 4000%, then their income would be only £1 for a £100 loan over 1 month. This would in no way enable the companies to recover their costs of creditscore, marketing, banking costs or staff…? So realistically, small short term loans cannot be given at any APR you’d find acceptable – thus people must denied access to small short term credit if Wonga style companies were to be banned.

  67. 67 Full & Frank
    October 31, 2011 at 9:35 pm

    The Guardian newspaper ran a story on the “perception management” companies which pay grunts to scour the internet on behalf of big-hitting corporate clients.

    These termites resort to fake personalities and phony stories to present false impressions about their clients’ credibility and honesty.

    Hill & Knowlton is one of the best known PR houses and perhaps one of the most disreputable outfits in a repugnant industry infested with hoods, perverts and gangsters.

    H&K was infamously caught with its pants down after being nailed for telling whopping lies on behalf of the CIA during Desert Storm.

    Wonga.com is just the sort of rogue outfit that one would expect to engage the scum services of “perception management” company.

  68. 68 jonesxxx
    October 31, 2011 at 10:16 pm

    Thanks for drawing our attention to this. yes, I think I have seen the posts these people leave.
    This may be the article you are talking about:

    http://www.guardian.co.uk/media/2010/aug/03/london-public-relations-reputation-laundering

    Also a bit here

    http://www.guardian.co.uk/media/2008/aug/05/bbc.marketingandpr

    and here The Guardian reveals a particularly despicable act by Hill & Knowlton:

    http://www.guardian.co.uk/education/2001/oct/04/socialsciences.highereducation

  69. December 9, 2011 at 2:26 am

    It’s really a great and helpful piece of information. I am satisfied that you just shared this helpful information with us. Please stay us up to date like this. Thank you for sharing.

  70. 70 jade blair
    December 10, 2011 at 5:40 pm

    I have never had a problem with wonga, always paid back on time and the money always came through quickly.
    i dont think the interest is that high, the transfer fee always bumps it up though, if you arent a wonga customer yet you can always find a promo code to save £5.50 on your loan (the transfer fee)

    I also beleive that the customer service on the phone to wonga is pretty poor but if you email them or facebook them the response is alot better!

  71. 71 Alex
    December 18, 2011 at 3:10 am

    payday lenders are fleecing people who are short of cash,and this is so called responsible lending.

  72. 72 Jelena E
    February 24, 2012 at 11:49 am

    I used wonga few times and it is really fast and easy to use. Their charges are very high, but if you need money NOW it is up to you to make a choice. wonga accepts people on benefits and not many lenders do this. When I tried to find a loan, filled in plenty of application forms and find out that most of the lenders who say they accepted my application are spammers who just trying to steal my money. I decided it is better to pay those charges, but to get money that I need and not just pay to spammers for false promises. Especially those brokers or what ever they call them self… Take fees for finding loans at set APR, but when it comes to processing, actual lenders they find say they can not approve application or just changing APR to much higher than was agreed between you and brokers. Also txt messages started coming to my mob. At the beginning I was receiving minimum 20 messages and about the same calls from “lenders” who asked me to pay them first month installment by some international money transfers services, buying some coupons or other similar stuff. I did not paid any of them, because I made research on internet on each number and company I was contacted from.
    With wonga… well at least it is safe. Also I know someone who took the loan fro wonga, was not able to repay it, extended it for another month and was not able to repay again. He called wonga and explained situation. They asked when he would be able to repay the amount. No more charges or interests was added to the existing amount. Actually they just friz it and he repaid then in 2 payments within the next 2 month. This did not affected his account in any way and he was able to use the services in the future.
    Also if you repay the amount you borrowed earlier you paying interests only for the period before you repaid. I do this very often.
    If you can live with out borrowing, do it.

  73. 73 Annoyed Mum
    March 5, 2012 at 8:10 am

    My Son used WOnga to help him out untill his pay went through – he unfortunately was not paid the correct amount by his employer which left him short on his re-payment for Wonga, so i paid it for him using my debit card, the detils of which were then deleted from my sons online account as i did not want my card details stored or used by Wonga again in the future -all fine or so i thought. My son again used wonga – and why not when it had all been fine the first time, he then had his hours cut at work and was struggling to repay Wonga so he very sensibly contacted them and arranged a repayment plan that would in theory allow him to repay his loan but at a slower and more affordable rate – we thought this would be fine and to begin with it was. BUT imagine my distress when i checked my bank balance and found that Wonga had taken over £400 from my account with no authorisation to do so and no advance warning – they basically STOLE the money from my account and also cost me £100 in bank charges for going over my overdraft. We have now been trying to contact Wonga on the phone for 3 days and guess what – no one is answering the phone!! At this rate i will need a payday loan to feed my kids because Wonga have stolen from me! AVOID WONGA AT ALL COSTS!!!!

  74. 74 Jack Dorset
    April 6, 2012 at 8:41 pm

    Wonga is a typical loan firm that prey on the vulnerable, uncreditworthy and spendthrifts. If one needs a “Payday” loan it only means one thing. You are overspending. Therefore you need to cut your spending , not increase it by borrowing. We are all possessed of a Brain , and hopefully some commonsense, so get both into gear and find a way out other than Loan sharks. At the end of the day we are all volunteers, and , I don’t care what anybody says, debt is avoidable. With some it will mean sacrifices and willpower, but then that’s life is it not ? Regardless of who or what we are , we are all responsible for our own predicaments.

  75. 75 Anonymous ;)
    April 13, 2012 at 3:21 pm

    In fact we don’t charge anything like the large Representative APR
    Wonga charges the equivalent of just under 1% interest per day and that rate is applied to the loan amount and transmission fee for the period of the short term loan – usually between one and 31 days. The annual rate of interest is 360%. We know this may be hard to believe, because of the much larger Representative APR we are obliged to display. But that’s because the calculation required by law means that, where a loan is not taken out for a year, the interest rate must be compounded the same number of times the actual loan period would fit into a year. Because an annualised measure is distorting over short periods of time, we always show the total cost of repayment very clearly too.

    Eat my shorts sir !

  76. 76 jonesxxx
    April 13, 2012 at 4:03 pm

    Eat your own shorts Anonymous ;)

    You make a completely disingenuous argument. OF COURSE a loan taken out for 30 days will not incur 365 days interest. But the point of annualising the interest rate is so that comparisons can be made.

    Consider if you flipped it around the other way. Consider if you were to deposit your money in a bank. One bank tells you that they will give you 10% over 30 days and another says they will give you 11% over 11 months. Which is better?

    If we annualised both rates by converting them to APR we’d quickly see that 10% over 30 days pays a better rate.
    However if we used WongaLogic we would merely think that as 11 is bigger than 10 then so 11% is better.

    By attempting to discredit APR Wonga are deliberately trying to deceive the public.

  77. 77 WoNgAdMiReR
    May 14, 2012 at 3:38 pm

    I love Wonga logic. Seriously, I do. So there’s no compounding,eh? You mean you just sit pretty on top of your pile of cash, and not farm it out to more NINJAs? And we know that 360% APR is extravagantly low by any measure (love to see where you get the 360% from as opposed to your representative APR, by the way). Gotta love that logic. For some reason quite a few countries cap the interest rate for small personal loans at 30~50% APR, and obviously 360% is well under that. Go Wonga!

  78. 78 TriggerHappy
    July 11, 2012 at 8:34 am

    Wonga isnt that bad….. The real thieves are the banks. I would rather take a small wonga loan out and pay £10 interest for the service, than go a few quid over my overdraft and pay the bank £30 a day!!! Surely thats 10 times worse than wonga. I understand some people such as alcoholics and drud addicts may abuse it but for people like me, who are just trying to make a living on rubbish wages its a lifesaver.

    I bet most the negative comments aimed at ” vulnerable, uncreditworthy and spendthrifts” come from people who don’t have money issues and wouldn’t ever have to use wonga. I for one do not have any money left after my rent, food, electric bills, car insurance and petrol ect have all come out, because I don’t have a well paid job. I don’t overspend on things I don’t need. If you look at how much the price of petrol has increased, and food prices, some things jumping up by 30 or 40p each, its no surprise people need to borrow money.

  79. 79 Anony
    July 18, 2012 at 12:31 pm

    No issue with Wonga at all.

    Emergency, 3 days from pay day. Borrowed £300, paid back £314 on pay day.

    If you budget for what you can afford to borrow, and are responsible when it comes to repayments. It’s a great service.

    Idiots who borrow £500 to buy a plasma TV they can’t afford, and end up swallowing up 50% of their salary only have themselves to blame surely?

  80. 80 cpppeeer
    November 23, 2012 at 3:08 pm

    I came across this while browsing and just wanted to add my opinions. I think a large proportion of the problem with Wonga is down to the people borrowing money rather than Wonga themselves. I borrowed £150 for two weeks about a month back and to had to pay £21 interest/fees. Is this unreasonable? I don’t think so. The problem is when people take out unrealistic loans to buy silly items.

    If you’re earning £800 a month for example, with £400 monthly bills, it’s common sense that you don’t take out a loan for £500 to buy electrical goods or go on a holiday. You will get your £800 next month, pay your £400 bills and you will still be stuck with £400 to pay your Wonga loan and living expenses for the next month. People need to show some restraint, use common knowledge and budget properly so they don’t get into these situations. If you know you won’t be able to pay it back by the correct, don’t take the loan, then you won’t be left with absurd interest rates and charges. it’s really quite simple.

  81. December 10, 2012 at 5:57 pm

    The real problem here is that Wonga are not in control of what they have started. Their systems do not adequately check against fraud (no matter how much they tell us they have spent on getting it right!) and an ever growing list of people are suffering as a result. Wonga will say that they supply a much needed service that is better than the alternative, but the truth is they don’t really care as long as they make their money. They use ‘as big a net’ as they can to catch as many vulnerable people as they can, and try to blind them into thinking their rates aren’t ‘that bad’ by spurting rubbish about why we shouldn’t use APR to rumble what they are up to! They also try to hide the level of fraud by writing it off thus absolving the police from taking action, so it doesn’t get logged. One day someone will ask why we let it go on this long and ‘why didn’t someone stop it sooner?’
    Someone will have to pay for this mess but it won’t be Wonga!
    ( twitter.com/aloadofwonga )

  82. 82 RW
    February 1, 2013 at 4:15 pm

    Another severe problem with Wonga is they lend to anyone of any age as long as they can prove they have a job. Teens and Young adults are being targeted and then brought to slaughter. What happened to morals? is becoming wealthy the only focus? All I can say is we had to bail out our 22 year old because he was too inexperienced to know what he got himself into. I hope someday, these individuals who are behind this scheme have children who are exploited like they are exploiting ours. That seems to be the only way they (the people hiding under the guise of a company) will understand and comprehend the damage they are causing.

  83. 83 graham
    August 4, 2013 at 7:07 pm

    I have used Wonga on three occasions. the first two were problem free and very helpful. however I had a lot of problems around the time my 3rd loan was due to be repaid. I contacted Wonga to tell them I would not have the full amount and they extended my loan period. I was still unable to pay the amount in full and they asked me to fill in an on line form. I have now done this 3 times and spent hours on the phone to them. the result is that my loan is increasing all the time. at the moment its around £950 and rising. this started as a £400 loan 3 months ago. I have made various offers to pay the money back but they aren’t interested. I am realising that this is a ploy by them to extort more money. very very helpful initially but god help anyone who falls foul of them. nice smiling grannies on the tv but the lowest of scum behind the façade.


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