Sixteen years ago the Debt on the Doorstep campaign began to tackle extortionate costs imposed by non-bank lenders in the UK market.
As the campaigners for this noted when winning a cap on interest rates a decade later:
The lobby was followed up by a report from Richard Murphy, arguing the case for an interest rate ceiling, based on a forensic analysis of the business model of Provident Financial, and concluding there was prima facie evidence of market failure in the sector.
That report now seems to have disappeared from the web. I have republished it here.
Now Wonga is at death's door. The Guardian reports:
Britain's biggest payday lender, Wonga, is teetering on the brink of collapse following a surge of customer compensation claims in recent weeks that could cause it to call in administrators.
The short term loan provider has reportedly lined up Grant Thornton the accountancy firm, to handle a potential administration of the company should its board believe it is unable to avoid falling into insolvency.
The departure of exploitative lenders is good news.
The need for a social fund, run by local authorities, or centrally funded but with local administration, that those with a need for emergency credit can turn to, remains as pressing as ever. That creation of such a fund would be the right response to this news.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
My heart bleeds for them. Not.
“Debt on the Doorstep campaign began to tackle extortionate costs imposed by non-bank lenders …….”
The banks are nearly as bad they just don’t use baseball bats as a repayment incentive. …… Well not in public anyway.
It was Thatcher who scrapped grants and replaced them with loans. Shame that Blair never reinstated, like so many other things.
Carol wasn’t it Mrs T who also abolished the top usury rate of (I think) 49%, and opened the doors to this scandal?
And until Thatcher I remember that unemployment pay was earnings-related. We’ve lost so much of good from the 60/70s.
Carol Wilcox says:
“It was Thatcher who scrapped grants and replaced them with loans. Shame that Blair never reinstated, like so many other things.”
Yes. Blair was shameful in many ways.
A true heir to his political wet nurse. He still seems to be revered across swathes of the LP however. 🙁
I’ve been volunteering at Rainbow Savers Credit Union and shortly to receive training to help when Unuversal Credit hits our town. I’d also like to see The Money Shop and others go the same way as Wonga.
One of the reasons why Payday lenders prospered was that they were filling a gap left by commercial banks whose business model no longer includes support for the ‘branch’ model. Banks are sat on a massive amount of wealth in the form of real estate serving for the time being individuals, who in the subtext of recent circulars, the banks no longer want. The demise of the high street where retail banks as well as shops conduct their business, gradually falling to the power of the internet, will further hasten this process in my opinion. This will further accelerate the feeling of financial exclusion to many at the lower end of society.
Historically lower income earners could rely on such organisations as Friendly Societies, the Co-operative movement and in more recent times the advent of National Insurance. All of these it could be argued have or will fail to meet the need for an adequate safety net. One bright spark on the horizon, highlighted by your contributor v.bucknor, is the rise of the credit union movement which on a world wide basis has over 237 million members in 109 countries. The percentage of members of the population who are members of a credit union is quite revealing. In Canada 30 %, USA 25% and in Ireland a massive 77%. These ‘not for profit’ organisations provide savings and loans services at reasonable rates. However the equivalent percentage figure in the UK reveals a figure of less than 2% of the population are members of a credit union.
Here on the Isle of Man (not your favourite jurisdiction I appreciate) we started a credit union (www.mcu.im) two years ago. Call it co-incidence if you like but the two resident payday lenders have now ceased to offer loans and are merely collecting old debt. We offer a wide range of loans depending on the needs of our members. We are regulated and the interest rate we can charge is built into the legislation that governs our operation. The current maximum we can charge on a loan is 1% on the reducing monthly balance which over twelve months equates to a simple interest rate of 6.87% The writer mentions this not for commercial reasons, as our ‘common bond’ restricts membership to IOM residents, but to illustrate that there are some good things to celebrate and encourage in the midst of so much economic gloom filling our media headlines.
I strongly believe in credit unions – wherever they might be found
Good work!
The creation of Wonga was one of the first failures of the Tory government of 2010. It should have been never allowed to trade in the first place.