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Wonga chased debt with fake lawyers, says FCA
- billpg 12y agoI'm shocked (Shocked!) that a payday loan company would do such a thing.
- walshemj 12y agomm so as this is voted down how many ycombinator payday loan companies are there :-)
- gadders 12y agoI don't understand the hatred for Wonga. They lend to people with a high risk of default and so have to charge accordingly.
- deleted 12y ago[deleted]
- hessenwolf 12y agofrom wikipedia: The phrase caveat emptor arises from the fact that buyers often have less information about the good or service they are purchasing, while the seller has more information. Defects in the good or service may be hidden from the buyer, and only known to the seller. Thus, the buyer should beware. This is called information asymmetry. from me: Payday loan companies target the least educated, least financially sophisticated and most vulnerable members of society. Should society step in to protect these members of society? What about this: Should you let me, a smooth talking prick, put a brass plaque on the wall and convince your aging Mothers and Grandmothers to invest in my 2&20-fees option fund? Should you regulate my behaviour? Is it their fault for not understanding or my fault for taking advantage?
- gadders 12y agoSo you think that nobody except the financially desparate uses Wonga?
- M2Ys4U 12y agoPeople who aren't financially desperate have access to other lines of credit.
- gaius 12y agoIt's a fair question, and you should not be getting down voted. Wonga started out as an iPhone app. No one with a luxury smartphone is actually poor - just bad at managing cash flow. Hence the original term payday loan.
- SixSigma 12y agoBeing desperate reduces one's capability for rational thought and every ad break "Wonga" and other payday operators
- michaelt 12y agoI don't understand the hatred for Wonga. So, there's this idea called 'usury', which Wikipedia [1] defines as "the practice of making unethical or immoral monetary loans [...] A loan may be considered usurious because of excessive or abusive interest rates or other factors". People have been condemning it as immoral since about 1,200 BC (vedic texts) and continue to do so in the present day. When I visit Wonga [2] I am offered a loan at "Representative 5853% APR" and if that isn't usury, what is? (Wonga contend APR is a poor measure, as they charge a mere 22% in interest and fees over 18 days, which happens to be 5853% annualised) About the only good thing you can say about Wonga is they don't literally break debtors legs. [1] https://en.wikipedia.org/wiki/Usury https://en.wikipedia.org/wiki/Usury [2] https://www.wonga.com/ https://www.wonga.com/
- gadders 12y agoBut Wonga isn't for lending money for a year. It's for lending money for a few days or weeks. It's like going to Avis to rent a car for a week and them having to quote you the cost for a years rental.
- maaku 12y agoSo? The cost of money doesn't increase.
- gadders 12y agoSo you are against all compound interest?
- maaku 12y agoNo, although you'd be excused for thinking so -- I co-invented Freicoin afterall (http://freico.in/ http://freico.in/). I'm against nominal interest, which is the non-risk portion of the interest rate. But that is of zero relevance here. The point is that when I make a loan the interest rate is based on the risk of default, not how quickly it will be paid back. The rate shouldn't go up just because it's a short-term loan. Additionally, none of this loans are carrying enough risk to justify 5000% APR. This is pure extortion.
- vomitcuddle 12y agoPayPal does or used to do the same thing in the UK. Three years ago, I received threatening letters from a non-existent lawyer company when my PayPal balance went ~£50 below 0.
- motters 12y agoMy opinion on Wonga and other similar companies is that the usury laws which were repealed in the mid 19th century should be reinstated. In those times convicted usurers danced on the end of a noose, but I'm not suggesting that be used as a punishment these days. Mere imprisonment is probably a good enough deterrent.
- tim333 12y agoIn defence of Wonga they seem popular with their million or so users - they have a NetPromotor score of around 70% vs around 0% for the regular UK banking industry. ( http://www.openwonga.com/uploads/openwonga_statistics_oct_2013.pdf http://www.openwonga.com/uploads/openwonga_statistics_oct_20... ). Also for better or worse they don't lend generally to the destitute - they lend to people with normal income with something like an unexpected boiler to replace and tell the genuinely hard up to go away.
- rahimnathwani 12y ago22 comments. 20 about usury/rates/APR. 2 about fake law firms (the subject of the article).
- tlarkworthy 12y agoI always wondered if it was a viable to send letters pretending to be lawyers. Seems like it is on the cusp of legality. Maybe quite different in the US?
- mratzloff 12y agoI'm not a lawyer, but I expect you could create a shell company named Harmon, Kardon, Sennheiser, and Associates that was acting on behalf of Wonga, so long as you identified yourself as a collection agency in the fine print and abided by all the laws pertaining to collections. I'm confident that even in the US you could expect a hefty fine if you made up fake law firms wholecloth, though.
- ttctciyf 12y agoI think what might (or at least should) tip them over the edge here is that they added on fees for these imaginary law firms to their customers' bills. NAL, but sounds like plain, old fashioned fraud to me. Edit: I see I'm not the only one thinking this: http://www.taxresearch.org.uk/Blog/2014/06/25/wonga-committed-a-fraud-why-are-they-being-allowed-to-continue-in-business/ http://www.taxresearch.org.uk/Blog/2014/06/25/wonga-committe...
- frogpelt 12y agoAnd two about the comments (mine and yours).
- pessimizer 12y agoReading comments on an article about loan sharks breaking people's legs, would you expect all of them to be about the nature of leg fractures, or about the industry of loan sharking itself?
- richliss 12y agoThe issue with Pay day loans are that they are by their nature unfair, and they're run by morally dubious people who have no issue with profiting from this unfairness. Therefore they target people who don't understand what the impact will be with slick marketing. These naive, often uneducated people are fooled into thinking they're only borrowing £10 to pay for nappies, but they're really borrowing the potential for financial catastrophe. In a truly civilised society, pay day loans would still exist, but they'd be run as a special financial instrument of government, and be means tested with sliding scale interest rates and all profits would be put into educating these people about finance awareness. This way the idiot who doesn't have the money to buy the next CoD on the day of release, but must have it, would pay a high interest rate, but the mother who needs nappies would maybe get the loan as specific vouchers at a much much lower interest rate.
- nakedrobot2 12y agoWonga is backed by Index Ventures, who otherwise have a very fine reputation (they are major backers of Dropbox, for example) Companies like Wonga should really be legislated out of existence. I am disappointed that a reputable VC like Index Ventures would want to be associated with a company like Wonga.