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How Far Is The Government Responsible For Stupidity?
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At what point must people take responsibility for their own finances?
At what point must people take responsibility for their own finances?
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APR is interest.
It is the interest you would pay over a year. However, most pay day loans are not over a year and are for relatively small amounts so the actual interest paid is affordable. Affordable, but still a rip off.
Unfortunately the 'proper' banks have a very poor record for lending, and people tempted by pay day loans would probably not get any help there.
It is the interest you would pay over a year. However, most pay day loans are not over a year and are for relatively small amounts so the actual interest paid is affordable. Affordable, but still a rip off.
Unfortunately the 'proper' banks have a very poor record for lending, and people tempted by pay day loans would probably not get any help there.
DangerUXD
As others have already said - it's not necessarily 'stupidity'. It could also be described as 'deperation'.
These payday loan companies seem to have sprung up only in the past three to four years. When I was growing up, it was loan sharks. You could argue that the situation is better for those in need, because at least these companies are regulated.
Better, but not a great deal better.
As others have already said - it's not necessarily 'stupidity'. It could also be described as 'deperation'.
These payday loan companies seem to have sprung up only in the past three to four years. When I was growing up, it was loan sharks. You could argue that the situation is better for those in need, because at least these companies are regulated.
Better, but not a great deal better.
A few years ago we conducted a customer research project for a major player in this sub-prime finance sector.
They weren't at the 'worst end' of this market by any means but a number of the customers we spoke to had got into trouble with them and included some sad cases (in both senses of the word)
We decided we weren't comfortable having them as a client and declined a further project.
However ...
a large proportion of the customers we spoke to were very appreciative of the service offered by this company and knew exactly what they were doing. They couldn't get credit anywhere else (CCJs, bad credit rating etc) and needed relatively small loans to 'tide them over' for short periods.
And of course, the credit company's justification for the high rates is that they are dealing with bad risks and have to bear a lot of bad debt.
So for many of us who don't need it, this sort of product seems a very bad deal. For those in certain situations it's a godsend.
They weren't at the 'worst end' of this market by any means but a number of the customers we spoke to had got into trouble with them and included some sad cases (in both senses of the word)
We decided we weren't comfortable having them as a client and declined a further project.
However ...
a large proportion of the customers we spoke to were very appreciative of the service offered by this company and knew exactly what they were doing. They couldn't get credit anywhere else (CCJs, bad credit rating etc) and needed relatively small loans to 'tide them over' for short periods.
And of course, the credit company's justification for the high rates is that they are dealing with bad risks and have to bear a lot of bad debt.
So for many of us who don't need it, this sort of product seems a very bad deal. For those in certain situations it's a godsend.
Of course the responsible high street banks would never prey on the desperate...
// The Chartered Institute for Securities & Investment (CISI) report compared the cost of taking out a £200 unauthorised short-term overdraft from a typical payday lender and high street banks Lloyds and Nat West.
It found the cost of borrowing £200 from the payday lender was £66.
But the charge for borrowing the same amount from Lloyds Bank was £84.22, an APR of over 2,200%, and at Nat West the charge was £110, an APR in excess of 4,000%. //
Who is it you work for DangerUXB?
// The Chartered Institute for Securities & Investment (CISI) report compared the cost of taking out a £200 unauthorised short-term overdraft from a typical payday lender and high street banks Lloyds and Nat West.
It found the cost of borrowing £200 from the payday lender was £66.
But the charge for borrowing the same amount from Lloyds Bank was £84.22, an APR of over 2,200%, and at Nat West the charge was £110, an APR in excess of 4,000%. //
Who is it you work for DangerUXB?
There was a time when pawnshops were places of last resort.
Selling the family siver (gold ) was/is another last resort.
#pretty much the same way that sell your gold companies sprung up, needs must i suppose but i just see them preying on the desperate, broke. #
Who was that desperate/stupid/broke character who flogged off a few £billions worth of our gold. ? Ah well #needs must I suppose # there's always pay day.
Selling the family siver (gold ) was/is another last resort.
#pretty much the same way that sell your gold companies sprung up, needs must i suppose but i just see them preying on the desperate, broke. #
Who was that desperate/stupid/broke character who flogged off a few £billions worth of our gold. ? Ah well #needs must I suppose # there's always pay day.
yes I've been skint but I workied out the best way to get more skint was to borrow from load sharks at huge rates. Very very few things are that urgent that you must have the money today. I've heard of cases where someone has borrowed £100 for a night out and ended up owing thousands because of spiral borrowing. 95% of these loans are unnecessary but born out of "must have it now" thinking. They all claim to be able to afford the payements so money is coming in they don't need a shark loan in most cases. The reason they even have to consider these loans is because their credit is shot which means they are inherently disorganised/dishonest. I just dispair at the one sided "all lenders are barstewards" approach of this story.
//..95% of these loans are unnecessary but born out of "must have it now"..//
Do you mean as in - i've got no money to put food on the table - ?
That is a "must have it now"..
Or do you mean "must have it now".. as in i want to take the family out to a restaurant this weekend
Which is it - and where do you get this 95 % figure from ?
Do you mean as in - i've got no money to put food on the table - ?
That is a "must have it now"..
Or do you mean "must have it now".. as in i want to take the family out to a restaurant this weekend
Which is it - and where do you get this 95 % figure from ?
Yes I quite agree, Danger. I found the comparison with the “respectable” Lloyds and NatWest provided by Gromit most interesting.
What these companies do is not illegal and I would suggest is not immoral. The figures of 4,000% bandied about are provocative and whilst not misleading are not appropriate. The loan companies have to quote an “AER” figure to comply with the law. But these are offered as small amount (maximum £400) short term (maximum one month) loans. Furthermore, their application process makes the charges absolutely clear - far more clear in fact that the charges for many loans of much higher value are made.
Borrowing £400 for a month from Wonga costs the customer £125, or 31.25%. Whilst this is quite high in absolute terms I for one would not be prepared to lend four hundred quid without security to somebody I have never met and who I do not know for just £125. There is an element of risk to the lender and this must be reflected in the cost of the loan .
I think the main objection to businesses such as these is that is said that they “prey” on the vulnerable and that government must prevent this. But far more vulnerable are people who gamble when they clearly cannot afford it. The amount of cash passing through the nation’s betting shops - especially through the infamous Fixed Odds Betting Terminals - is phenomenal and the people using the facilities are just as vulnerable (if not more so) than those seeking payday loans.
And whilst we’re discussing it, let’s not get too bogged down with Wonga’s donation to the Conservative Party. I believe they started operating in the UK in 2007 and I don’t recall the then government being too up in arms about their operations.
Among the “problems” identified by the OFT are:
- a failure to work out whether people could afford the loans
Focussing again on Wonga they reject two-thirds of first time applicants so they must do some working out here and there.
- "aggressive" debt collection practices
I have not seen too much evidence either way for this, but obviously would not condone overly aggressive tactics. However, we must not confuse “aggressive” with “robust”. High Court Sherriff’s act in a robust manner when collecting debts but I would not say they are aggressive.
- a lack of sufficient forbearance for those who cannot afford the repayments
It’s back to responsibility. Adults have to be responsible for their actions, however “desperate” they may be.
What these companies do is not illegal and I would suggest is not immoral. The figures of 4,000% bandied about are provocative and whilst not misleading are not appropriate. The loan companies have to quote an “AER” figure to comply with the law. But these are offered as small amount (maximum £400) short term (maximum one month) loans. Furthermore, their application process makes the charges absolutely clear - far more clear in fact that the charges for many loans of much higher value are made.
Borrowing £400 for a month from Wonga costs the customer £125, or 31.25%. Whilst this is quite high in absolute terms I for one would not be prepared to lend four hundred quid without security to somebody I have never met and who I do not know for just £125. There is an element of risk to the lender and this must be reflected in the cost of the loan .
I think the main objection to businesses such as these is that is said that they “prey” on the vulnerable and that government must prevent this. But far more vulnerable are people who gamble when they clearly cannot afford it. The amount of cash passing through the nation’s betting shops - especially through the infamous Fixed Odds Betting Terminals - is phenomenal and the people using the facilities are just as vulnerable (if not more so) than those seeking payday loans.
And whilst we’re discussing it, let’s not get too bogged down with Wonga’s donation to the Conservative Party. I believe they started operating in the UK in 2007 and I don’t recall the then government being too up in arms about their operations.
Among the “problems” identified by the OFT are:
- a failure to work out whether people could afford the loans
Focussing again on Wonga they reject two-thirds of first time applicants so they must do some working out here and there.
- "aggressive" debt collection practices
I have not seen too much evidence either way for this, but obviously would not condone overly aggressive tactics. However, we must not confuse “aggressive” with “robust”. High Court Sherriff’s act in a robust manner when collecting debts but I would not say they are aggressive.
- a lack of sufficient forbearance for those who cannot afford the repayments
It’s back to responsibility. Adults have to be responsible for their actions, however “desperate” they may be.
No, are you really suggesting that any of these loans are taken out to buy food?? seriously? when Tesco throw away 10 tons a day? think about it! I must have the latest Blue ray now or I've run out of cigs/ganga/white ligtening, need to go on a pi55 up, must go to Ibiza to get ratted etc etc is what I'm talking about.
Yes Gromit I work for a bank but I don't think our lending rate gets much above 10%, I don;t see the loan sharks as kindred spirits, and we don't even have a high st presence in this country.
Yes Gromit I work for a bank but I don't think our lending rate gets much above 10%, I don;t see the loan sharks as kindred spirits, and we don't even have a high st presence in this country.
//No, are you really suggesting that any of these loans are taken out to buy food?? seriously? when Tesco throw away 10 tons a day? think about it!//
Think about what - what has tesco throwing 10 tons a day , got to do with , people taking out a loan to provide food ?
You have stated '' 95% of these loans are unnecessary but born out of "must have it now ''
What is the source of that information ?
Think about what - what has tesco throwing 10 tons a day , got to do with , people taking out a loan to provide food ?
You have stated '' 95% of these loans are unnecessary but born out of "must have it now ''
What is the source of that information ?
I know people who use these companies, I wish they didn't. And to some extent they are fools, but they also have limited choices. One had his hours of work halved by his employer because of the downturn. He is looking for another job, but hasn't yet been able to change*. in the meantime, his regular bills, mortgage, insurance, council tax, utilities still have to be paid. He is struggling and uses these loans. To him it makes sense. If his mortgage payment is missed he will be charged £50. So he gets a loan until payday to make the payment and avoid the penalty.
* Good news, he got another job confirmed today.
* Good news, he got another job confirmed today.
Again , I do not quite understand how Tescos "throwing away 10 tonnes of food a day" somehow invalidates the point that there are people borrowing money to pay for food.
Banks and the financial services sector need to accept that they have to be regulated, because all too often we see them attempting to take advantage.
I would agree though that for these short term loans, the APR is not necessarily the most useful interest rate measure, and yes they are unsecured loans, so should cost more.
The question becomes how much more should be considered an acceptable charge to cover the institutions extra risk?
31% of the value of the loan for just one month might seem a little excessive to a lot of people....
Banks and the financial services sector need to accept that they have to be regulated, because all too often we see them attempting to take advantage.
I would agree though that for these short term loans, the APR is not necessarily the most useful interest rate measure, and yes they are unsecured loans, so should cost more.
The question becomes how much more should be considered an acceptable charge to cover the institutions extra risk?
31% of the value of the loan for just one month might seem a little excessive to a lot of people....
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