Leaked letter reveals Wonga thought it was worth £15bn

[vetran]

People would adjust if you couldn't get mortgages or buy fresh pineapples, that doesn't mean there aren't markets for them.

Speaking of mortgages, super-high rate very short-term loans are often used here aren't they (bridging loans)?

The problem with the payday loan market are the eye watering rates and the carefully planned escalation of the debt.

Friend of mine had a partner die on her, she was in a bad way financially and the mortgage and loan providers rip her off at the worst time, it was sad to watch.

If providers wan't to service the weak & vulnerable they need to be monitored effectively.

I doubt the loan sharks have disappeared they just have legal competition.

[cojak]

I vaguely remember that now, and won't argue your point in that sense. To be fair, I do also see how it's the kind of service that will attract vulnerable (or just stupid) people. But at the same time I can see it as a legitimate service that people may need from time to time - and such a service couldn't exist at normal APR levels. Especially as doing business with poor people is more expensive.

Actually, I'm meeting you half way - I do see the need for emergency short-term loans (with the appropriate APR).

It's the business model of targeting the vulnerable who don't have the means to pay it back that I object to.

[SpontaneousOrder]

Actually, I'm meeting you half way - I do see the need for emergency short-term loans (with the appropriate APR).

It's the business model of targeting the vulnerable who don't have the means to pay it back that I object to.

That I'll agree to (although I'd prefer other ways to deal with it than legislation).

[SpontaneousOrder]

If the risk is so high that you need 4000% APR then I suspect the risk isn't worth doing.

if it wasn't worth doing then they wouldn't be valuing themselves at 15 billion!

[d000hg]

It's not 4000% just because of risk, but because otherwise the interest over such a tiny timeframe is negligible. It makes more sense to think of it as a fee than interest - in fact it probably makes more sense to price it that way with penalty fees. Or maybe that's what they DO do, but are required by law to present an equivalent APR and that's where it ends up looking so crazy?

[SpontaneousOrder]

It's not 4000% just because of risk, but because otherwise the interest over such a tiny timeframe is negligible. It makes more sense to think of it as a fee than interest - in fact it probably makes more sense to price it that way with penalty fees. Or maybe that's what they DO do, but are required by law to present an equivalent APR and that's where it ends up looking so crazy?

I'm pretty sure I remember seeing an interest rate a long time back - which didn't seem massive. Then they had an equivalent APR (which I think is mandated by law) which is huge (because obviously it's only supposed to be a few days loan).

I don't know, though, whether the interest is capped. I suspect that it must be as after a short-ish time, the interest rate would be totally inappropriate for a long-term loan. So in reality (again, i'm guessing) I would guess that the interest is capped (for that rate at least) - and so it is then effectively a fixed (if you go up to that cap) penalty fee.

A lot of assumptions there, but it's the kind of thing that viewed as a penalty fee would seem entirely appropriate - while some people viewing it as an APR of 4000% would have a fit even though it's exactly the same.

[SimonMac]

Breaking legs? How very vulgar! (and rather 20th Century...)

There's more than one way of breaking the law...

Wonga's fake legal letters passed to police | Business | theguardian.com

'Halifax, Lloyds TSB and NatWest's fake letters - Money Saving Expert

[vetran]

'Halifax, Lloyds TSB and NatWest's fake letters - Money Saving Expert

yep they were all at it and should face criminal charges.

[Martin@AS Financial]

Actually, I'm meeting you half way - I do see the need for emergency short-term loans (with the appropriate APR).

It's the business model of targeting the vulnerable who don't have the means to pay it back that I object to.

And it gets worse:

"Payday loan brokers regularly raid bank accounts of poor customers"

According to the report, the account is raided at 3am as state benefits are typically paid in just after midnight

Payday loan brokers regularly raid bank accounts of poor customers | Money | The Guardian

[SpontaneousOrder]

And it gets worse:

"Payday loan brokers regularly raid bank accounts of poor customers"

According to the report, the account is raided at 3am as state benefits are typically paid in just after midnight

Payday loan brokers regularly raid bank accounts of poor customers | Money | The Guardian

Using the word 'raided' is poisoning the well somewhat.