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SarahBell

Free Money - Thanks Wonga

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...this is good, because many of those that were lent money, should never have been lent the money.....mortgages are checked for affordability so should unsecured loans be, the problems came when loans were late making the debt accumulate with interest and fees making it non payable, they are writing off their own fees and charges ......anyway it is a private company, risky lending is high risk, do they expect a bailout?....less work for the debt collectors though.

....if you can't afford to save £10 per week how can you afford a loan for £20 per week.....robbing peter to pay paul...nonsensical. ;)

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Guest eight

...this is good, because many of those that were lent money, should never have been lent the money.....mortgages are checked for affordability so should unsecured loans be, the problems came when loans were late making the debt accumulate with interest and fees making it non payable, they are writing off their own fees and charges ......anyway it is a private company, risky lending is high risk, do they expect a bailout?....less work for the debt collectors though.

....if you can't afford to save £10 per week how can you afford a loan for £20 per week.....robbing peter to pay paul...nonsensical. ;)

Have they ever actually taken anybody to court for none payment? I wonder if their interest rates would stand up to legal scrutiny? Or if the financial system as a whole would like to see some precedent set as to what represents usurious lending? Only takes one test case and their whole business model could be finished.

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Wow, Wonga can write off 220 million pounds and still keep going, they must be making some serious money; reminds me of the painting 'Gin Alley'...

This.

The size of the 'debts' < mega interest charged on them. To the extent they can write off £1/4 billion without blinking.

Scandalous biz model.

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...this is good, because many of those that were lent money, should never have been lent the money.

It doesn't excuse changing the rules retrospectively on them!

Not really different to writing off mortgage debt so house prices won't fall.

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Do Wonga lend to children?

As a grown-up I like to be treated as such and that includes being expected to take responsibility for my mistakes.

Many adults in some respects are no better than children and they have the vote!

So if Wonga now won't lend to the these people who will next and will the same thing happen again? Moral hazard????

I do love the idea that these people could have bought a TV / Tablet etc... with the cash and now it's been written off and they don't even have to give back what they bought. For those who where desperate and where using the money for foods/bills I have less of an issue with but then it comes back to the question of if they are borrowing money for food who will lend it them next.

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Wow, Wonga can write off 220 million pounds and still keep going,

As I understand it, the strategy is to lend to high-risk debtors - and charge thousands of percent APR. It isn't a business I'd be comfortable to pursue - too depressing - but I don't see it as unethical... necessarily.

Where Wonga writes of debt, this debt was likely - in the main - beyond recovery... and, in all likelihood, they have already broken even as a result of the excessive interest charges - some of which will have been collected.

Another mitigation is that they can record customer details for these debt-write-offs - such information, about potential customers of other businesses, likely, also has significant value... and this information could be sold.

Isn't Wonga the epitome of functioning Capitalism? Taking big financial risks for big financial rewards... sometimes you win big - sometimes you lose big... the only oddity is that the losses will tend to be realised at the same time - when books are reviewed and bad debt is written off.

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Remember, if they issue these loans, its predatory behaviour. If they don't, its freezing the poor out of credit.

At least they only target adults. UCAS and the scumbags in the university meat grinder target people who are legally still children.

Don't have sympathy for anyone in debt. They are debasing your spending power.

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Desperation can take many forms. The immediate issue is today. The interest rate and repayment is tomorrow's issue to be addressed.

Why do you think they were desperate? Why don't you think they were just chancers?

A poor mate of mine who worked minimum wage in a shop racked up a £20k debt because he had a penchant for Leica cameras. He's not a "victim". Though he actually did think of himself as such at the time! He knew he could never pay it back. And he didn't give a f*ck.

Edited by EUBanana

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Wow, Wonga can write off 220 million pounds and still keep going, they must be making some serious money; reminds me of the painting 'Gin Alley'...

Well the article quotes technology to check customer affordability but must have been ********.

How fast can you get a loan there? 10seconds ? Where are the IT guys here - a short time loop and 100% approvals online?

Edited by Ash4781

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As I understand it, the strategy is to lend to high-risk debtors - and charge thousands of percent APR. It isn't a business I'd be comfortable to pursue - too depressing - but I don't see it as unethical... necessarily.

The APR is irrelevant to their business model really and will also look scary for this kind of short-term loan. If you pay a £20 fee to get £500 a week early then that's a 200% APR.

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Why do you think they were desperate? Why don't you think they were just chancers?

A poor mate of mine who worked minimum wage in a shop racked up a £20k debt because he had a penchant for Leica cameras. He's not a "victim". Though he actually did think of himself as such at the time! He knew he could never pay it back. And he didn't give a f*ck.

Excuse me.....but how did he get to owe £20,000 ........owing £200 or even £2000 but £20,000......would you lend £20,000 of your own money to someone you didn't know or know the history of?

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Many adults in some respects are no better than children and they have the vote!

So if Wonga now won't lend to the these people who will next and will the same thing happen again? Moral hazard????

I do love the idea that these people could have bought a TV / Tablet etc... with the cash and now it's been written off and they don't even have to give back what they bought. For those who where desperate and where using the money for foods/bills I have less of an issue with but then it comes back to the question of if they are borrowing money for food who will lend it them next.

Simple answer? Ultimately you, me, your neighbours.......

'Lent' to them without our consent of course, when we come home to find a brick has been put through a rear window and the food in the kitchen has been nicked rather than the flat screen TV.

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Excuse me.....but how did he get to owe £20,000 ........owing £200 or even £2000 but £20,000......would you lend £20,000 of your own money to someone you didn't know or know the history of?

I'm not hugely privy to his arrangements - I'm his mate not his banker :P - but I believe a pretty big wedge of it, maybe all of it, was credit cards. I know he was paying a huge chunk of his salary on credit card interest, until it finally sank him and he declared himself bankrupt. TBH I think thats what he should have done, and said as much, he was being milked of every penny. But he got into that state not out of desperation, but because he wanted shiny things and felt entitled to them, IMO.

I don't let money matters (or politics) get in the way of friendship though, I shook my head a bit at the tales but kept mostly quiet. It does influence the sympathy I have for others in his position though.

"Borrowing for food" is proper tear jerker stuff. While I'm sure it happens, anecdotally it certainly isn't my experience of the low salaried indebted.

Edited by EUBanana

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The APR is irrelevant to their business model really and will also look scary for this kind of short-term loan. If you pay a £20 fee to get £500 a week early then that's a 200% APR.

I disagree... the APR is entirely relevant to the business model - if not to the honest customer. Yes - I know they claim to be offering short-term loans... but these are loans without security - loans that can (and obviously do) go bad. Sure, Joe might borrow £500 a week early for £20 - but... what happens if - a week later - he doesn't repay? The debt spirals... and interest compounds... and several weeks later, a £500 debt has grown considerably and now does not appear so manageable.... so it isn't repaid the weeks after that, either. It takes several months to track Joe down - and, by now, the interest exceeds the debt. This interest is on Wonga's books as a debt to Wonga - though it isn't really real... they never had much chance of collecting it.... and, from this point, the 'bad debt' spirals - never to be repayable. During this period, the debt is used as collateral for other loans to Wonga... to finance more loans to new customers. At this stage, Wongas accounts are dependent on the size and quality of its assets... and based upon an assessment of their risk, some number will be picked, probably quarterly, for Wonga profit.

As for your example... I think your estimate of rate is WAY too low. Look at the front page of Wonga's website:

https://www.wonga.com/

Today, one can apply for a loan of £111 for 28 days for £38.12. This is an monthly rate of ~34% - which is equivalent to over 3400% APR. Their front page doesn't offer a price for a loan as big as £500.

Their representative example shows an APR of 5,853%. At 5,853% APR... a £100 loan would be £5,853 debt after 1 year; over £342,000 after 2 years and would be over double the UK's GDP after 6 years. When debts can rise as rapidly as this, it is easy to see how Wonga could come to have £220m in bad debts that they need to write off - they can even do this while having already made a substantial profit on each of the written-off debts.

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What about government schemes to give people cheap Mortgages and loans to cover deposits? If these people could not get loans through commercial sources, government is merely doing a Wonga, and lending money to those who cannot afford to repay it. Will HTB result in mortgages being written off a la wings? Houses will effectively be gifts to those who used the scheme. I suspect this write off is the leading edge of a massive financial meltdown and debt forgiveness. The losers will be the careful, frugal and prudent.

Perhaps they'll insist student loans are also written off, as clearly the recipients cannot afford the repayments.

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I don't think above-board/legal sub-prime lending is a very good business to be in.

Remember Yes Car/credit.

Pawn brokers where you lending against a small, high value asset - jewellery - works.

Lending against consumer goods a la Cash Convertors does not work.

Unsecured lending to people without a pot to p1ss in. Nope.

Illegal lending, with leg breaking or getting paid in kind can work - but its a bit unsavoury.

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