
Wonga chased debt with fake lawyers, says FCA - anu_gupta
http://www.bbc.co.uk/news/business-28015456
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rahimnathwani
22 comments. 20 about usury/rates/APR. 2 about fake law firms (the subject of
the article).

~~~
tlarkworthy
I always wondered if it was a viable to send letters pretending to be lawyers.
Seems like it is on the cusp of legality. Maybe quite different in the US?

~~~
ttctciyf
I think what might (or at least should) tip them over the edge here is that
they added on fees for these imaginary law firms to their customers' bills.
NAL, but sounds like plain, old fashioned fraud to me.

Edit: I see I'm not the only one thinking this:
[http://www.taxresearch.org.uk/Blog/2014/06/25/wonga-
committe...](http://www.taxresearch.org.uk/Blog/2014/06/25/wonga-committed-a-
fraud-why-are-they-being-allowed-to-continue-in-business/)

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gadders
I don't understand the hatred for Wonga. They lend to people with a high risk
of default and so have to charge accordingly.

~~~
michaelt

      I don't understand the hatred for Wonga.
    

So, there's this idea called 'usury', which Wikipedia [1] defines as "the
practice of making unethical or immoral monetary loans [...] A loan may be
considered usurious because of excessive or abusive interest rates or other
factors".

People have been condemning it as immoral since about 1,200 BC (vedic texts)
and continue to do so in the present day.

When I visit Wonga [2] I am offered a loan at "Representative 5853% APR" and
if that isn't usury, what is? (Wonga contend APR is a poor measure, as they
charge a mere 22% in interest and fees over 18 days, which happens to be 5853%
annualised)

About the only good thing you can say about Wonga is they don't literally
break debtors legs.

[1] [https://en.wikipedia.org/wiki/Usury](https://en.wikipedia.org/wiki/Usury)
[2] [https://www.wonga.com/](https://www.wonga.com/)

~~~
gadders
But Wonga isn't for lending money for a year. It's for lending money for a few
days or weeks.

It's like going to Avis to rent a car for a week and them having to quote you
the cost for a years rental.

~~~
maaku
So? The cost of money doesn't increase.

~~~
antr
The cost depends on the counterparty risk, and at the same time the overall
liquidity to provide that type of loan is not provided by your every day bank.
I don't think that Wonga has a great reputation, I don't like their business,
but they are providing a service no one else is.

~~~
SideburnsOfDoom
Eh, If I offered to kick people in the head at £10 a go, I'd be "providing a
service no one else is". If it's legal, ethical or something that people will
pay for is a different matter.

~~~
antr
> Eh, If I offered to kick people in the head at £10 a go, I'd be "providing a
> service no one else is".

Don't be silly. People use Wonga because people need very short term loans.
Full stop. Barclays, Lloyds, HSBC, Santander, RBS, etc, do not provide that
service (and they won't).

~~~
SideburnsOfDoom
Some people need crack too, but we can decide to make it illegal to provide
that service if we as a society don't think that meeting it is a good idea.

~~~
antr
Thanks, I'll leave it here [https://www.goodreads.com/quotes/539027-never-
argue-with-stu...](https://www.goodreads.com/quotes/539027-never-argue-with-
stupid-people-they-will-drag-you-down)

~~~
SideburnsOfDoom
That's such a persuasive argument!

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richliss
The issue with Pay day loans are that they are by their nature unfair, and
they're run by morally dubious people who have no issue with profiting from
this unfairness.

Therefore they target people who don't understand what the impact will be with
slick marketing. These naive, often uneducated people are fooled into thinking
they're only borrowing £10 to pay for nappies, but they're really borrowing
the potential for financial catastrophe.

In a truly civilised society, pay day loans would still exist, but they'd be
run as a special financial instrument of government, and be means tested with
sliding scale interest rates and all profits would be put into educating these
people about finance awareness.

This way the idiot who doesn't have the money to buy the next CoD on the day
of release, but must have it, would pay a high interest rate, but the mother
who needs nappies would maybe get the loan as specific vouchers at a much much
lower interest rate.

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vomitcuddle
PayPal does or used to do the same thing in the UK. Three years ago, I
received threatening letters from a non-existent lawyer company when my PayPal
balance went ~£50 below 0.

~~~
nonuby
Does the FCA know? I would definitely take the opportunity to give paypal a
punch when due

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billpg
I'm shocked (Shocked!) that a payday loan company would do such a thing.

~~~
walshemj
mm so as this is voted down how many ycombinator payday loan companies are
there :-)

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nakedrobot2
Wonga is backed by Index Ventures, who otherwise have a very fine reputation
(they are major backers of Dropbox, for example)

Companies like Wonga should really be legislated out of existence. I am
disappointed that a reputable VC like Index Ventures would want to be
associated with a company like Wonga.

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motters
My opinion on Wonga and other similar companies is that the usury laws which
were repealed in the mid 19th century should be reinstated. In those times
convicted usurers danced on the end of a noose, but I'm not suggesting that be
used as a punishment these days. Mere imprisonment is probably a good enough
deterrent.

~~~
tim333
In defence of Wonga they seem popular with their million or so users - they
have a NetPromotor score of around 70% vs around 0% for the regular UK banking
industry. (
[http://www.openwonga.com/uploads/openwonga_statistics_oct_20...](http://www.openwonga.com/uploads/openwonga_statistics_oct_2013.pdf)
). Also for better or worse they don't lend generally to the destitute - they
lend to people with normal income with something like an unexpected boiler to
replace and tell the genuinely hard up to go away.

