Yorkshire councils in move to block payday lenders

ACCESS to payday lender websites is to be be blocked from computers in libraries and council contact centres across a swathe of Yorkshire.
Wonga has reported a year of surging profits as its number of cash-strapped customers swelled to more than one million.Wonga has reported a year of surging profits as its number of cash-strapped customers swelled to more than one million.
Wonga has reported a year of surging profits as its number of cash-strapped customers swelled to more than one million.

Council leaders in West Yorkshire and York agreed the joint move as Wonga, one of the leading players in the field, announced it was making profits of more than £1 million per week.

Staff computers at the six local authorities which together employ more than 60,000 people, will also be prevented from accessing around 200 sites offering short term loans.

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Keith Wakefield, leader of Leeds City Council and chairman of the Association of West Yorkshire Councils, said: “We are seeing more and more evidence of people finding themselves with serious debt problems after being enticed into taking out loans from payday lenders.

“A recent survey of 113 lenders by the Citizen’s Advice Bureau found 9 out of 10 applicants were not asked to provide proof that they could afford the loan.

“It can be no surprise that this sort of irresponsible lending leaves many people facing serious hardship.

“This is an industry which must face greater controls over their operations, but, until they do, we feel that it is necessary to take this action.”

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It is estimated around 78,000 people across the six authorities owe money to payday lenders who have been criticised for the high interest rates they often charge.

The Archbishop of Canterbury weighed into the debate earlier this year warning Wonga he wanted to compete it out of existence by supporting other forms of lending such as credit unions.

Wonga told the City yesterday that its profits after tax rose 36 per cent to £62.5m during 2012 as it lent £1.2 billion in the year, a rise of 68 per cent.

Founder and chief executive Errol Damelin said the online lender operates in an “upfront and transparent” way, adding it makes 5p of profit on every £1 it lends.

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He said: “This is not about people on breadlines being desperate and us being a lender of last resort. We reject two-thirds of applications.”

Instead he said the industry has been tarred by behaviour of other high-interest lenders.

“There’s a lot wrong in how other parts of the industry operates,” he said.

And Mr Damelin insisted the company’s profit margins are “not outrageous in any way to us”.

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He added: “Our customers are telling us that we provide very good value for money.”

The entire payday lending industry, worth £2 billion, was referred in June for a full-blown investigation by the Competition Commission after the trading watchdog uncovered ‘’deep-rooted’’ problems including some providers basing their businesses on people failing to pay back their loans and being hit by charges and additional interest costs.

Mathew Lawrence, research fellow at the Institute for Public Policy Research thinktank, said: “Wonga-bashing isn’t working. Wonga’s profits of more than a million pounds a week make it clear that the campaign for affordable short-term credit is losing, while Wonga is winning.

“Wonga is proving that despite the efforts of campaigners, the payday lending industry and its sky-high interest rates are cornering this growing market in cash-strapped-Britain. Having lent to more than a million customers, Wonga are clearly the market leaders.

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“What opponents of high cost credit should focus on instead is how to support the growth of an affordable short-term credit alternative that can match the payday lending industry for innovation and customer service, without the bad lending practices and rip-off costs.

“While we wait for the Competition Commission’s review of the payday lending industry, it’s vital that people struggling to make ends meet have other alternatives.”