Wonga’s head of regulatory and public affairs has told a committee of MPs that he could not work out the interest on a loan from his own company because “my maths isn’t good enough.”
my sums show if rolled over av wonga loan of £157 for 3 months would reach £417.36 – before the interest rate would be frozen…
Henry Raine, head of regulatory and public affairs at the payday loans company, defended his business to the House of Commons Public Accounts committee, where he was grilled by chair and Labour MP Margaret Hodge on the effectiveness of consumer credit regulation.
Raine said the company had handed out around six million loans, and 85% of people pay back on time.
The MPs also struggled to work out how many late loans that would add up to, with Hodge suggesting one milllion, before the commitee settled on the correct number – 900,000.
Wonga’s representative insisted that the process was transparent, even for those with poor maths skills.
“We want to show people what they will owe in pounds and pence, not APR. People can’t calculate APR. I can’t calculate APR.”
Wonga chief on its notorious 4,214% APR: “I agree it’s terrible.” – but insisted lenders don’t pay that, because loans short-term
When asked about whether more financial education was needed for people to understand borrowing, Raine replied: “My own view is that a lot of money has been put into financial education in this country for not a lot of benefit.”
The MPs struggled with figures again as Raine mentioned that they had written off around £7m of £77m worth of income from loans, with one MP suggesting that was “more than 10%”. Raine corrected him: “It’s less than 10%”
Raine insisted he would use a service like Wonga himself.
“When I was a trainee solicitor I would certainly have used a company like Wonga, in special circumstances, occasionally.
“My children are too young to have used it, but I certainly would have. If you take a credit card out for a short period, it’s an incredibly cheap way to borrow, but people end up paying way more because they just make minimum payments.
“Lending money short term is a very expensive business. The reason we have had such a successful business is that banks have not been prepared to lend. People see how transparent we are, they see what they are going to pay. Banks hit people with unarranged overdraft fees they have no idea about.”
Margaret Hodge grilled Wonga’s Henry Raine at the Public Accounts Committee
Labour MP Austin Mitchell pressed Raine on his claim that the company could justify high interest rates because the business is “high-risk”, yet 85% pay back on time.
Raine said: “15% is actually a high risk and it’s an expensive business to run. It’s not because of the lack of checks, people’s circumstances may change or they may have borrowed more from other people, which is information we might not have access to.”
He also shed some light on the profile of an average Wonga customer, telling the committee: “Around 60% of our customers are under 40 and very, very few are over 50. It’s the nature of it only being available online.
“Their average salary is £20,000, more likely to be men and 25% have never used a payday loan before. We have no evidence to suggest they are ill-educated.”
Raine refused to say he was entirely against a proposed cap on interest rates, but “we are not in favour of one either.”
He said: ‘I have not led a campaign against a cap. All we’ve said is, let’s look at the evidence, we need to know what a cap would be and how it would work.”
wonga hedging their bets on capping osts of credit – interesting as they’ve been vociferous in lobbying govt not to do this behind scenes!
Asked about Wonga’s sponsorship of Newcastle football club, Raine said they had not deliberately targeted a poor area. “Chelsea or Arsenal were not available.”