Monday 5 November 2012

You've been Wongad

You know what Wonga is right? You've seen their adverts offering payday loans to desperate people and you've seen their logo emblazoned on the tops of football clubs like Blackpool FC and next season you will see it on the Newcastle United strip too.

You know that their business model is based upon making predatory loans to vulnerable people don't you? 

You know that Wonga loans can have APRs of up to and over 4,200%?

Well, that's about it for what I would expect any reasonably informed person to know about Wonga and the "legal loan shark" industry, given the mainstream media's reluctance to cover the subject in the detail it deserves.

Here's some of the stuff that the majority of the mainstream media seem happy to remain silent about.
Did you know that the payday loan sector has been booming since the economic crisis and the resulting "credit crunch"? In 2011 Wonga handed out an astonishing 2.5 million super-high interest loans. The predatory loan sector is one of the very few sectors of the UK economy that seems to be booming through the turgid economic climate created by George Osborne's ideologically driven, catastrophically miscalculated and economically destructive austerity agenda.

Did you know that these kinds of super-high interest loans are illegal in almost every other advanced western democracy? That other nations tend to protect their poor and vulnerable from this kind of brazen economic parasitism. Even the notoriously Ayn Rand inspired, free-trade preaching, banker friendly mob that run the United States have imposed a Federal maximum APR of 36% for loans to military personnel, which is less than one one hundredth of a typical Wonga APR. Predatory payday loans are illegal in 13 states and regulated in the other 37 states. In Canada these kinds of loan are prohibited by usury laws, with any loan exceeding 60% APR (including fees and brokerage) being considered criminal.

Did you know that some financial sector institutions use the receipt of a payday loan as evidence of credit-unworthiness? The fact that you can be credit blacklisted simply for taking out payday loans seriously damages the argument that these loans are just a "helping hand" and not predominantly marketed at the extremely poor, vulnerable and financially illiterate.

Did you know that these kinds of payday loan companies are so universally despised that even the Daily Mail readership are near unanimous in their condemnation (scroll down to the bottom of this article and click the "best rated" tab). Here's what Bob, a Daily Mail reader from Bridport, had to say about them:
"These rip off organisations should be properly regulated. Their interest rates are appalling. Feeding on the vulnerable in society. The adverts are a disgrace to elderly people. Shut them down now along with all the other Payday loan sharks on TV."
Did you know that Labour MP Stella Creasy has been campaigning to bring in US style regulation of the payday loan sector she describes as "legal loan sharks" and that the Tories have steadfastly refused to take action? Creasy described the Tory refusal to address the exploitation of poor and vulnerable people as "unforgivable". Once you read the next few paragraphs you'll come to understand why the Tory party are desperate to avoid imposing regulation on the sector.

Did you know that a bunch of Wonga executives spent £1,250 a head to attend a Conservative party "speed dating" event? An event which was held during the Tory party conference where paying guests (which also included representatives from companies such as  Aviva, Barclays and PricewaterhouseCoopers) got to spend 20 minutes apiece "chatting up" high-ranking Tories such as Michael Fallon (the enterprise minister), David Gauke, (the Treasury’s exchequer secretary), and Sajid Javid, (Tory economic secretary).

Did you know that David Cameron's senior digital economy advisor, Jonathan Luff quit and was allowed to go and work for Wonga as a political lobbyist, with immediate effect? A former Cameron advisor as a political lobbyist should be a valuable asset to Wonga, given that they are desperately fighting against mounting pressure for regulation of the predatory loan market and Canadian style caps on APR repayments.

Did you know that the revolving door between the Tory party and Wonga goes the other way too. Adrian Beecroft is the chairman of Dawn Capital, the private equity fund that belongs to. The Tory party invited him to draw up labour reform legislation for them, what he came back with was one of the most absurdly self-interested policy documents ever presented; the Beecroft Report. Aside from recommending a number of labour reforms that would benefit Dawn Capital directly, the report also recommended the introduction of fire-at-will legislation. Similar legislation was just passed in Spain and led to a huge spike in unemployment as companies saw the new legislation as a financial incentive to lay off their long-term staff and replace them with labor-rightless and low wage trainees. That the business model is fundamentally based upon the strategy of making super-high interest loans to desperate people, a large unemployment spike resulting from the introduction of Beecroft's fire-at-will legislation would certainly represent a significant boost for their business.

In March 2012 the Tory party co-treasurer Peter Cruddas was forced to resign after he was caught out offering direct political access to leading Tories including David Cameron and George Osborne for donations of £250,000 and making claims that donor's "issues" could be discussed at the Number 10 policy unit given a large enough donation, however the Beecroft affair (£537,000 in donations to the party followed by an invitation to actually draw up their economic strategy for them) and the Wonga revolving door are far more serious, but the mainstream media refuse to treat these issues as such.

It is bad enough that the Tory party allowed one of their wealthy donors to draw up party policy for them, but that some of the most obvious beneficiaries from the implementation of such policies would be the man who wrote it, his venture capital company and their operation. Now the revolving door is going the other way with one of David Cameron's senior adviser going to work as a political lobbyist for Wonga.

Given this revolving door between Wonga and the Tories it is completely unsurprising that the Tory leadership are obstructing every effort to regulate or restrain the activities of predatory lenders.

No comments: