Creasy said: \”This isn\’t broken Britain, but broke Britain – and it is being bled dry by the legal loan shark industry and their interest rates of 1,700% or more. R3 highlight how in the next six months alone, a whopping 3.5 million Britons expect to take out a payday loan. Sixty-seven per cent say they are unable to get credit anywhere else.\”
The research showed that 32% of those who took out a payday loan had to get another one to pay it off.
Creasy said the government should legislate before Christmas. \”We know that capping would make a massive difference to those people. I don\’t see why the government doesn\’t get on and do it now.\”
Yes, how wonderful, let\’s abolish the only form of credit that, by your own numbers, 2.3 million people can get.
The whole thing is really terribly simple. Lending small amounts of money for short periods of time is expensive. Therefore borrowing small amounts of money for short periods of time is expensive.
And that\’s pretty much it.
I do wonder whether Stella Creasy is actually capable of farting and chewing gum at the same time.
This is fun as well:
The true cost of lending to short-term borrowers is less than 2% of the amount charged by Wonga, the most expensive and highest profile payday lender.
My Home Finance, a not-for-profit organisation set up by the government and the National Housing Federation in 2010, charges a representative APR of 69.9%, just 1.66% of the 4,214% APR charged by online lender Wonga.
My Home Finance loans are not subsidised, and a borrower would pay £7.09 a week for 52 weeks to repay £300, producing a total repayment of £383.68 over the year including interest of £68.68 and an administration charge of £15. The same borrower taking out £300 from Wonga for just 31 days would repay a total of £398.91.
See what they\’ve done there?
That £15 arrangement fee? It\’s charged just once per annum. But they\’ve compared it with the same arrangement fee (which might well be a different amount I agree) which is charged for a month\’s loan from Wonga and then annualised that month\’s fee.
This is known, to be delicate about it, as lying like fuck with numbers.