Weekly payday roundup: 7 days ended 20 sept 2012:
If you ever want to take lessons on how to get in the spotlight and then stay there – and damn the consequences – don’t look any further than the UK’s biggest payday advance lender.
Wonga is a household name these days, though it’s certainly the kind of word you’d wash your child’s mouth out with soap if you heard them utter it. It business is both fast-growing and successful, but at the same time, it’s earned a serious reputation for being as impressively predatory and cutthroat as it is a master of marketing.
There’s around £1.4 trillion in personal debt floating about the UK, according to official figures, and one of the primary drivers of this debt – which continues to mount – is the instant cash loans provider, which relies on high market saturation and slick marketing campaigns. The annualised percentage rate on a Wonga loan is an offensively high 4,214 per cent, enough to send anyone considering such a loan into paroxysms of rage.
Despite this, the firm is making money hand-over-first. A new report revealed that it made something like £185 million in revenue last year – and £46 million in profit. However, it grows its business by cashing in on desperate Brits finding themselves with less cash than they used to, thanks to the rising cost of living and wage freezes – if they’re lucky enough to still have a job.
Rising unemployment and increasing inflation have caused payday advance lenders to thrive, as the short term loans they make available to the public – often without the need of a credit check – can give some temporary respite to harried Brits who find themselves short when it comes to putting food on their table or petrol in their tank.
The Office of Fair Trading has taken Wonga to task time and again for its sharp practices, accusing Wonga of employing threatening, aggressive tactics with borrowers struggling to make ends meet. Consumer groups and MPs have also been highly critical of payday lenders – Wonga chief amongst them – because of massive interest rates, criminal late fees, and draconian tactics when it comes to collecting on loans, with the prevailing view that payday lenders are little better than legalised loan sharks.
However, even this bad publicity can’t seem to slow down the Wonga juggernaut. Like an evil empire, it continues to grow, boasting nearly 2.5 million agreed loans last year, a figure that was four times higher than it was in 2010. The massive increase was attributed to the initiative the lender started last year to accept applications over mobile phones.