back to article Dodgy payday loan ads make up 83% of cases probed by UK's FCA

The majority of cases under investigation by the Financial Conduct Authority now involve online adverts for "cheap" credit services, the regulator has said. Some 80 per cent of the cases it has launched in the past four months involve firms that offer financial products over the internet or through mobile phones. All in all, …

  1. mark 63 Silver badge

    A tax on the terminally stupid

    A tax on the terminally stupid. Shouldnt be allowed.

    Licensed loan sharks. Genuine loan sharks would never have dreamed of charging 5000%

    These idiots who take up these offers need protecting from themselves. Unusually sympathetic angle from me i must admit

    1. Daggersedge

      Re: A tax on the terminally stupid

      Why shouldn't a tax on the terminally stupid be allowed? It's not as if banning it is going to make them any less stupid, is it?

      At least someone is making money off the stupid this way and that's something considering how much the stupid cost the taxpayer. There's all the benefits they end up getting, especially if they get their stupidity classified as some sort of disability. There's all the consequences of their stupid actions. Their stupidity doesn't end with payday loans, you know; it affects every part of their lives. They drive stupidly, for instance. If they ever manage to get a job, they do stupid things that harm the business.

      Oh, I know, you feel sorry for them. They are 'vulnerable' people who need the rest of us to watch out for them so that their stupidity isn't 'stigmatised'. The truth is, if you help stupid people, all you get is more stupid people.

      Stupid people should be taxed. They should be left to face the consequences of their own stupid actions.

      1. Phil O'Sophical Silver badge

        Re: A tax on the terminally stupid

        They should be left to face the consequences of their own stupid actions.

        But that's not what happens. The rest of us have to pick up the bill, we get stuck with higher insurance and welfare contributions to cover the costs of helping the people stupid enough to borrow at 5000%. And if they weren't helped? They'll end up on the street stealing or begging from us, we still pay. Better to stop their stupidity (or more accurately, their ignorance) getting them into trouble in the first place.

      2. Jedit

        "At least someone is making money off the stupid this way"

        There are already laws to defend the mentally handicapped aganst sexual exploitation, but raping their wallets is OK in your little world I guess?

        The people who go to payday loan companies are mainly desperate, not stupid. They're taking the loan so they can pay the rent or eat. Sure, there will be the odd cretin who goes to Wonga so he can buy a PS4 and those people deserve whatever they get, but in the main payday loan companies are morally equivalent to a man offering a homeless woman a bed for the night if she'll fuck him.

        1. TheOtherHobbes

          Re: "At least someone is making money off the stupid this way"

          Even the Bank of England has noticed that wages are - oh look, they're falling. While prices are increasing.

          So if you have a steady job on the borderline - oh look, you're fucked. Working full time and you can't afford to pay your bills any more.

          Apparently this is called 'being irresponsible.' Right.

        2. Arctic fox
          Thumb Up

          @Jedit: I have to say old chap that it is very rare that I feel that someone............

          ...............(myself included) has really hit the nail on the head regardless of the issue concerned. However, this time I am forced to acknowledge that you really have achieved that Holy Grail as far as posting is concerned:

          ".........loan companies are morally equivalent to a man offering a homeless woman a bed for the night if she'll fuck him."

          That was spot on. See icon.

        3. kindyashley

          Re: "At least someone is making money off the stupid this way"

          Pay day loans are supposed to make your life little bit easier in an emergency situation like, unexpected health issues, broken car, sudden important business trip and etc.. they are not meant to buy PSP, smartphone or spend a luxury holidays...

    2. LarsG

      Re: A tax on the terminally stupid

      Not stupid.

      Just desperate.

  2. Anonymous Coward
    Anonymous Coward

    If you need a payday loan then you shouldn't get one.

    What you should get is financial advice to tell you WTH you need to borrow 10 quid at +5000% APR until payday.

    1. Anonymous Coward
      Anonymous Coward

      Re: If you need a payday loan then you shouldn't get one.

      For some people that may be true, but there's a fundamental failing on the part of the moralistic opponents of payday lenders, and that's to understand that conventional interest costs don't scale down well for very short term and small loans to higher risk borrowers.

      If you're a middle class liberal, you probably have ready access to a fairly cheap rolling overdraft facility and rather more expensive card credit. The former comes with an interest rate of perhaps 7%, the latter perhaps 18%. But because you already have arrangements with these people, the risk is low, the payment arrangements are in place, and they've already done the checks to know how much they think you're good for. You probably think this is normal and fair, and that everybody should have access at that price.

      Now consider a payday lender customer. By definition the customer does not have access to a rolling overdraft or available card credit (either 'cos they've maxed it out, or they don't even have a bank account). When the lender sets them up as a customer, they've got few good ways of judging your creditworthiness, so they're pricing in a shed-load of risk. Then there's the admin of loan setup, which is probably five quid a pop (fully loaded call centre & systems costs, staff time and all company overheads). You've got to send out statutory written guff that nobody reads, so there's a quid or so on printing and postage. Then there's collections and payments processes, and follow up on overdues, all time consuming and costly. And of course you've got marketing and distribution costs. None of these largely fixed costs scale well for small payments, and that leads to apparently astronomical interest rates.

      There's some really good analysis done a few years back on payday lenders in Ontario which looked at the costs of the industry, and structurally will not be dissimilar to the UK:

      http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=10&ved=0CHsQFjAJ&url=http%3A%2F%2Fwww.sse.gov.on.ca%2Fmcs%2Fdocuments%2F264303.pdf&ei=LbHsU7PlJKbmyQOqnYDAAw&usg=AFQjCNEOtMday8jaEpIoebbEQcs3kVvILw&bvm=bv.73231344,bs.1,d.bGQ&cad=rja

      This established that the costs to the lender of a $300 loan for two weeks were $65. That's the fat end of 600% interest. Any additional fixed charges that get applied (like quite reasonably charging overdue customers quite modest fixed sums for reminder letters and for late payments) dramatically increase the measured interest rate. The liberals are outraged by all of this, but where's their answer?

      You can't lend unsecured to the financially inept for 7% annual. The welfare state has bloated beyond belief and has nothing more to give (well until the whelk-stall bunglers get in next year). And the fixed costs don't go away. So the choices are to live with it, or to regulate the interest rates down to a nice, Hampstead liberal approved number like 9%, and then wonder why there's no payday lenders, and good old fashioned unregulated doorstep lenders are back, complete with their even more expensive loans and traditional approach to late payments.

      1. Anonymous Coward
        Anonymous Coward

        Re: If you need a payday loan then you shouldn't get one.

        good old fashioned unregulated doorstep lenders

        They, at least, don't advertise on TV to make it seem like they're nice cuddly folks that just love to help tide you over. People knew that the old-fashioned doorstep sharks were bloodsucking bastard lenders of last resort that you avoided unless you really, desperately, needed them. Even pawnbrokers were further up the food chain, but today how many people would consider pawning a watch, or even selling their TV in somewhere like cash convertors, instead of the "easy" option of Wonga?

        1. Anonymous Coward
          Anonymous Coward

          Re: If you need a payday loan then you shouldn't get one.

          "They, at least, don't advertise on TV to make it seem like they're nice cuddly folks that just love to help tide you over."

          They didn't need to. Every poor neighbourhood had one or two of these people. And I think you'll find that the "customer service" was quite obliging up front. It was only at collections and arrears that the pickaxe handle came out, and in that respect the circa 4% write off that payday lenders have can be seen as an act of absolute charity. Murphy & McBastard (Back Street Lending) LLC wouldn't have put up with £1 in every £25 not being repaid with full interest.

          1. Anonymous Coward
            Anonymous Coward

            Re: If you need a payday loan then you shouldn't get one.

            circa 4% write off that payday lenders have

            More like 20%, and they still make a fortune.

        2. Triggerfish

          Re: If you need a payday loan then you shouldn't get one.

          I'd say quite a lot do use cash converters actually. To me a quick indicator of how well a towns economy seems to be doing at the moment is to check the amount of pound shops and pawn shops.

  3. paulc

    there is a legitimate use for these...

    say a need to get your car fixed in a hurry but there's not enough money left until payday... and the intention IS to actually pay it off in full on payday...

    when it becomes a habit and you end up not completely paying it off and you haven't made any attempt to cut your non-essential outgoings, then you've got troubles... real troubles...

    1. Anonymous Coward 101

      Re: there is a legitimate use for these...

      There may be circumstances when it makes sense to borrow money from a payday loan company, but I genuinely fear what they are. The saddest thing is people borrowing money from them to waste on rubbish.

    2. Anonymous Coward
      Anonymous Coward

      Re: there is a legitimate use for these...

      If you are going to pay off loan in full after a short time you'd be better off using a credit card.

      Furthermore if you're living hand to mouth such that you can't handle a small unexpected outgoing the last thing you need is a payday loan.

      1. John G Imrie Silver badge

        Re: there is a legitimate use for these...

        There are two assumptions you have made there.

        1) You have a bank account.

        2) Your bank will give you a credit/debit card.

        1. Anonymous Coward
          Anonymous Coward

          Re: there is a legitimate use for these...

          John, I realised that but I didn't want to get in too deep about what kind of credit status someone in such circumstances would likely have, the reasons behind that and why they should be the last sort of person to go for a payday loan.

      2. Triggerfish

        Re: there is a legitimate use for these...

        Furthermore if you're living hand to mouth such that you can't handle a small unexpected outgoing the last thing you need is a payday loan.

        That's unfortunately the problem the most vulnerable are getting screwed.

    3. teebie

      Re: there is a legitimate use for these...

      I was talking to someone about how it was entirely possibly for a payday loans company to be run ethically, and in a way that benefits society as a whole (e.g. in the broken down car example). He pointed out I had just described a credit union.

    4. jonathanb Silver badge

      Re: there is a legitimate use for these...

      That works if you are short of money this month, but have enough coming in at the end of the month to cover your normal expenses for next month, plus your car repair, plus interest on the loan.

      People in that situation can normally get an overdraft facility, or pay for the repair by credit card and pay the credit card bill in full when it comes in, and not pay any interest at all.

      I can't really think of an example where someone could sensibly use a payday loan, and not have a cheaper source of finance available.

    5. kindyashley

      Re: there is a legitimate use for these...

      @paulc - you are correct when it becomes the habit to go for pay day loan, every month ..... then the real problem starts to pile up.. pay day loan are meant for occasional use and not on a regular basis..

  4. This post has been deleted by its author

  5. Longrod_von_Hugendong
    Unhappy

    Paramount to...

    Credit record suicide, don't ever use them - if you are that tight for money for car repairs etc. go and speak to family / friends or anyone else, try banks or a credit union.

    not only that, they are legal loan sharking.

  6. Phil O'Sophical Silver badge

    Usury

    Aren't there still laws against usury? It's hard to see 2000% upward APR rates as anything else. Rather than ban the firms like Wonga, just put a reasonable legal limit, maybe 100%, on the annual interest rate that any lender can charge, and maybe ban their TV advertsing (like they ban gambling ads). That will force the firms to police their own business.

    1. John G Imrie Silver badge

      Re: Usury

      There is a law coming/come in that makes it illegal to recover more the 200% of the initial loan no matter the APR.

    2. airportable

      Re: Usury

      Believe there used to be an interest rate cap in the UK 50%? but it was scrapped some years ago.

    3. Anonymous Coward
      Anonymous Coward

      Re: Usury

      a 100% APR would mean that a payday loan company would make less than 27p a day on a £100 loan. Over the period of a 4 day loan they would hardly scrape a £1 in fees and so it would not cover even the setup costs.

      What they would need to do is separate out a setup fee from the APR and set limits on both independently.

  7. b166er

    Begs the question; why are they allowed to keep trading?

  8. Anonymous Coward
    Anonymous Coward

    I'll just leave this here...

    http://talkingpointsmemo.com/livewire/john-oliver-sarah-silverman-payday-loans

    It's not just a UK thing. Actually I've contracted for a US company that offers payday loans in the UK. I'm so sorry. I need to go wash my hands now...

    1. Richard 120

      Re: I'll just leave this here...

      Don't beat yourself up about it, there are worse things to get paid for.

      I used to work in sales. I'm so sorry, I need to go wash my soul now...

  9. Anonymous Coward
    Anonymous Coward

    didnt you see the Stacy Dooley documentary? they set up a fake loan shop in the high street to see who applies - the answer: Fucking morons. They had no comprehension of interest rates, couldnt tell you if 3000% was good or bad . All they understood was "now" and "later" . money now, pay later.

    I'd guess 1 in 10 customers is not financially ruined by the experience . cleverly using it as the sharks would have you believe its for - tenner for a couple days till payday

    1. Triggerfish

      I think one of the best things we could do would be to reintroduce some sort of home economics back into school, teach people some cooking, some budgeting, how credit works etc.

      1. Anonymous Coward
        Anonymous Coward

        "Home Economics"

        Benefits only the consumer... so any possibility getting any backing for that?

      2. paulc

        Can't have that...

        the people might realise they're being screwed by the banks and credit card companies as well... ;)

  10. Anonymous Coward
    Anonymous Coward

    Payday loans companies don't make their money from people who borrow for a few days and then pay it back at their next pay day. They actually rely on people not having enough money to pay it back on time

  11. Anonymous Coward
    Big Brother

    Payday loans?

    Payday loan, more like loan sharking to welfare claiments at 4,000 percent interest. I wonder who owns these loan sharking companies?

  12. Fungus Bob Silver badge

    Obligatory John Oliver

    https://www.youtube.com/watch?v=PDylgzybWAw

  13. Henry Wertz 1 Gold badge

    Usury laws?

    We have the same thing here in the US... It's weird. I know there are usury laws (in Iowa these cap interest AFAIK at 29.99%... pretty bad still but yeah.) But payday loan places routinely end up with rates that amount to 300-400% APR (if not higher.) It's pretty dumb for anyone to go for a payday loan but these rates really are quite predatory, a lot of these people would not have trouble repaying even at the 29.99% rate and they simply don't realize how badly that 25% (or whatever) per month builds up.

  14. KayKay
    Unhappy

    They can do officially very low interest. But if you can't repay at the end of the week, they roll it over into a new loan -- which has its own setup fees. Naturally nobody can afford to pay back a full week's pay as they need money for food. Whatever they can afford will generally be less than the roll-over fees.

    1. kindyashley

      @kaykay - It will be good practice to take loan of very small amount and commit the repayment period at the end of the month, then you will have at least 3 weeks to save some money each week to help you repay at the end of the month..

      It is simply a art of balancing your lifestyle to make some saving every month - and if it becomes a regular habit of yours then eventually you will never end up in a situation where you will need payday loan ever again. :)

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