The man pictured above is John Kiely. In 2009 he was convicted of two counts of blackmail, after threatening an auxiliary nurse whom he had loaned £300 to. By this time, Kiely had built up an illegal loan sharking empire, which had made him an estimated profit of £2.9 million. He charged interest rates of up to 2,437% APR to low income clients in the Manchester area. It seems right and proper that exploitation of vulnerable people in this manner is against the law.
Compare and contrast.
Wonga.com is a registered, legitimate and 100% legal company, which specialises in providing loans to the same low income demographic as Kiely. A glance at its home page shows us that they charge a representative interest rate of 4214% APR. That’s not a typo. Four thousand, two hundred and fourteen percent. John Kiely was offering a good deal in comparison.
The difference, I hear you say, is that Wonga.com do not use violence to collect their money. Good. That doesn’t mean that all is well. It is not difficult to find horror stories about Wonga customers who have found themselves in disproportionately enormous amounts of debt as a result of missing a payment.
Surely we should be concerned about the act of charging vulnerable people extortionate rates of interest, not just about the manner in which it is collected. Rates this high are exploitation, pure and simple. Does the credit risk that these groups present really justify rates of over 4000%?* I think not.
A particularly sad aspect to this story is that demand for these loans goes up at Christmas. Parents will try almost anything to avoid disappointing their children on Christmas morning. There is a well organised campaign, calling for a limit on the interest rates that these payday lenders charge, which can be found here. I urge you to take a look.