Payday advance lenders found to be charging as much as 6,000 per cent interest – and in some cases even more – were labeled as “greedy” recently by government ministers.
The current state of the UK economy has left many hard-up Brits having no recourse when their high street banking providers refuse to provide them much-needed credit. This has led millions to turn to instant cash loan providers in order to get the cash they need, but these short term loans are accompanied by exorbitant interest rates and late fees that can cripple a borrower in the long term – especially if a repayment deadline is missed.
Iain Duncan Smith, Work and Pensions Secretary, recently announced that the Government has plans to do whatever it can to break the stranglehold these lenders have on the British populace. The government minister called for a higher number of credit unions to be founded in order to provide less expensive lending to lower income earners, highlighting the massive rates these ‘predatory’ loan providers are charging their helpless customers.
Mr Duncan Smith’s department came forward with examples of these charges, highlighting how one couple taking out a £300 loan in an emergency had a bill in excess of £2,000 just two short months afterwards – which corresponded to an annualised percentage rate of more than 6,300 per cent. Other lenders, such as Wonga, offer a 4,214 per cent loan on £100 for a period of seven days, which means borrowers need to repay £112.78 in order to avoid massive late fees.
About seven million people in the UK may be held captive by ‘poverty premium’ lenders, with ministers saying that lower income earners have no choice but to pay more for credit if they find themselves in dire circumstances.