Payday lender Wonga has increased its APR by 1600%! It was already eye-wateringly high; it’s now 5853%, according to The Guardian.
That’s prompted lots of media attention and calls for increased regulation. No surprise there.
Simon Read has campaigned extensively on this. In his recent piece in The Independent , he says we don’t need to ban payday loans, just ensure that anyone taking one out should have chosen to do so, rather than “being flogged a deal they can’t afford.”
How do we ensure that? Anyone contemplating such a risky step should get good and impartial advice about their options; and should take a little time before deciding, instead of being rushed into a decision. However, these loans are by definition emergency loans: the borrower either has, or thinks they have, no alternative and no time.
I would never recommend payday loans; but banning them or capping rates would remove, or at least limit, a finance source that for some borrowers and some situations might be the only alternative. More and better advice is probably the answer.
DO YOU WANT TO KNOW MORE?
See some of my previous blog posts on this thorny subject: