Category: Loan Sharks

Wonga Group to halve UK workforce as part of restructure

Wonga Group will remain as Newcastle United sponsor until at least 2017, despite a major restructuring and cost reduction programme that will see it shed half of the workforce supporting its UK arm.

The company has announced a strategic refocus on its consumer business, which will see its UK headcount drop from 650 to 325 as its alters its business model in light of the rapidly changing short-term credit market.

A spokesman confirmed that all marketing is under review as part of the process.

However, he added:

“As far as Newcastle United is concerned, we have a contractual obligation until 2017.”

It is expected the phased reduction in roles will primarily impact teams that support the UK business from London, Dublin, Cape Town and Tel Aviv.

The remaining roles are expected to be based in London and Cape Town, with plans to close the Tel Aviv office by mid-2015 and the Dublin office by mid-2016.

Wonga will immediately launch a formal 30 day consultation period for those at risk of redundancy and expects all changes to be complete within 12 months.

Andy Haste, who was appointed group chairman in July, said:

“Our focus is on creating a business that meets the demand for short-term credit sustainably and responsibly, resulting in good customer outcomes.

“We’ve already made significant changes, including appointing a new leadership team, implementing a new risk decision engine and tightening our lending criteria.

“However, Wonga can no longer sustain its high cost base which must be significantly reduced to reflect our evolving business and market.

“Regrettably, this means we’ve had to take tough but necessary decisions about the size of our workforce.

“We appreciate how difficult this period will be for all of our colleagues and we’ll support them throughout the consultation process.”

As part of the restructuring plan, Wonga – which has also agreed to sell its small business lending brand Everline to Orange Money Ltd – will now focus on its core consumer businesses in the UK and overseas.

It has likewise filed an application for authorisation with the Financial Conduct Authority in the UK, beginning a regulatory process that can last up to a year.

Source – Newcastle Evening Chronicle, 24 Feb 2015

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Loan sharks could take advantage of payday lending caps, according to CAB

Loan sharks could cash in following caps on payday lending, according to the Citizens’ Advice Bureau.

Caps limiting the interest rate and fees instated by so-called payday lenders have been introduced by the Financial Conduct Authority in a bid to protect people struggling with debt.

As of Friday, January 2, companies such as Wonga – who previously had annual interest rates higher than 5,000 per cent – must comply with regulations that will see interest and fees capped at 0.8 per cent per day.

Under the new rules, the total cost of a loan will be limited to 100 per cent of the original sum and default fees will be capped at £15.

While the move has been welcomed by the Darlington Citizens Advice Bureau (CAB), the organisation has warned the changes may cause more vulnerable people to fall prey to loan sharks.

Darlington CAB’s Dawn Gill expressed fears that loan sharks could take advantage of those now unable to access as much money as they need.

She said:

“Caps are a good thing but clients will still want money from somewhere – they’re being protected from high interest rates but companies may not lend as much.

“They may not be able to get as much as they were expecting or anything at all.

 “If they don’t get what they want, they are in danger of reaching out to someone like a loan shark instead of coming to us, for example.

“We haven’t seen it happen yet but the changes are still new and it’s a worry.”

Ms Gill urged payday lenders to work with CABs in order to help their clients manage their finances.

She said:

“The ideal situation would be for payday lenders to refer their clients to us before they take out a loan at all and let us help them to maximise and manage their income.

“I’d advise people to come to us and let us help them find ways to manage.

“We can help with benefits, cutting energy bills or working out incomings and outgoings and priorities.

“There are a lot of people prioritising paying back intimidating people who knocked at their door with money rather than paying their rent or council tax but they could end up losing their home.”

To anonymously report a loan shark, contact the Illegal Money Lending Team by emailing reportaloanshark@stoploansharks.gov.uk

or calling 0300-555-2222.

Source –  Northern Echo,  20 Jan 2015

Hartlepool foodbank set to launch debt advice service to help struggling families

Hartlepool Foodbank is set to expand its services to help people deal with debt after winning a funding boost.

The Churches Together project, which has given out a whopping 60 tonnes of food to over 8,000 individuals since launching two years ago, secured the cash prize from Lloyds Bank’s Community Fund.

The foodbank, based in Church Street, came second in a regional online public vote to secure the funding.

The £2,000 will be used to launch a new Community Money Advice (CMA) debt advice service this year.

Al Wales, co-ordinator of Hartlepool Foodbank, said:

“We are so grateful to everyone who voted for us.

“Finishing second was a big achievement and shows the level of support there is for the work of the foodbank in the town.”

Foodbank bosses decided to focus on debt-related issues as it is one of the biggest issues faced by clients who are referred to them for emergency food parcels.

The new service will be headed up by foodbank trustee Lisa Lavender.

She said:

“We are delighted with this award because it means we will be able to offer completely free, face to face, quality money advice services which will contribute to the good already being done around the issue of debt in the town by agencies such as West View Resource Centre, Citizens Advice Bureau and Credit Union.”

According to the Trussell Trust charity, which runs the Hartlepool and other foodbanks, more than one in 10 UK families have taken out a pay day loan to make ends meet in the last year.

And almost a quarter have fallen into debt to be able to provide for the family.

Managers say they are currently well stocked with beans and pasta but are very low on tinned fruit, sugar and fruit juice and custard and tin tomatoes or pasta sauce.

You can leave them in permanent collection points at Tesco Extra, in Burn Road, or Morrisons, in Clarence Road.

Supporters can also take them to the foodbank on Tuesday or Friday mornings.

Source –  Hartlepool Mail, 19 Jan 2015

Middlesbrough Council to provide £85,000 to establish ‘community bank’ in town

A community bank in Middlesbrough town centre to challenge pay day lenders has been recommended by council chiefs.

A new community bank to be based in the heart of Middlesbrough is at the core of Labour mayoral candidate Cllr Dave Budd’s campaign to secure the position in May, when current Independent Mayor Ray Mallon will step down.

Deputy Mayor Cllr Budd, Executive member for finance and governance, has recommended in a report to be put before the Executive on Tuesday that Moneywise Community Banking be provided with a two-year grant totalling £85,000 to support its plans to locate to a town centre premises.

It aims to help over three years 4,000 new members, provide 1,200 training courses and issue loans amounting to just over £0.5m.

A loan from Moneywise of £300 with a typical APR of 26.7% over 12 months, the total repayable amount would be £342.79.

In comparison, the council report states the same loan from a doorstep lender (APR 272%) would cost £546 to repay; from an online instant loan (APR 1058%) it would cost £627.54 to repay; and from an illegal lender or loan shark (APR 1000%), it would cost £2,900 to repay.

Moneywise Community Banking – a not-for-profit member owned credit union – will deliver a number of financial support services including safe and easy savings; an optional Visa debit card service; low cost loans; Christmas savings club; white goods and furniture at discounted prices; free employability training; and debt and money management advice.

It was originally based in Hartlepool and now operates across Teesside, East Durham and North Yorkshire with offices in Redcar, Hartlepool and Scarborough. It is regulated by the Financial Services Authority and the Prudential Regulation Authority, which is also the case with banks.

All member savings within Moneywise are fully protected by the Financial Services Compensation Scheme so members can save safely in the knowledge that they cannot lose their savings, the report said.

Cllr Budd has said previously that a “modern, effective” credit union for Middlesbrough has to be “competitive and give an instant answer like companies such as Wonga do”.

“This has worked elsewhere and it can work in Middlesbrough. It will offer credit at fair rates and gives all Middlesbrough residents the opportunity for greater financial security.”

The report states that the two-year £85,000 grant would be funded through existing resources within the Community Support Fund.

Moneywise and Middlesbrough Council would work together to identify suitable premises.

Source –  Middlesbrough Evening Gazette, 14 Jan 2015

Cuts To Local Welfare Schemes ‘A Christmas Present To Loan Sharks’

This articlewas written by Patrick Butler, social policy editor, for The Guardian on Thursday 18th December 2014

Poverty charities and councils have warned that the government’s refusal to guarantee funding for local welfare schemes will force low income families in crisis to turn to food banks and loan sharks.

The government announced in January that it would no longer provide £180m central funding for local welfare assistance schemes operated by English local authorities after April 2015, triggering a cross-party revolt by Conservative MPs and council leaders, Labour councils and charities.

It is believed that the communities secretary, Eric Pickles, attempted to secure £70m for local welfare to announce in Thursday’s local government finance settlement, but was blocked by the chancellor, George Osborne.

The local government minister Kris Hopkins told the Commons on Thursday that there would be no additional funding for local welfare, although he encouraged councils to make further formal representations, raising faint hopes that the government may revisit the decision in February.

Local welfare provision offers emergency help for a range of vulnerable people who fall into unexpected crisis, including women fleeing domestic violence, homeless people, pregnant mothers, care leavers, pensioners and people suffering from chronic physical and mental health problems.

Some in Whitehall are understood to be concerned that cutting local welfare will provide additional fuel to critics who argue the government does not care about poverty. A cross-party report on food banks this month urged the government to protect local welfare assistance, saying food bank referrals would increase if it was not reinstated.

Hopkins said that although there would be no new funds for local welfare, ministers would outline a notional figure of £130m in the overall grant allocations to councils – a cut of £50m – although this would not be ring-fenced, meaning councils can spend it on other services.

Cllr Andy Hull, Labour-run Islington council’s executive member for finance, called the decision not to provide local welfare funding “an early Christmas present from the government for loan sharks and payday lenders.”

He added: “This safety net supports families to stay together, helps people sustain their tenancies and keeps kids out of care. It is a lifeline, not a luxury. Now, thanks to the government, it lies in shreds.”

The Local Government Association said almost three-quarters of local authorities will abandon or scale back local welfare schemes unless they receive government funding. Two county councils, Nottinghamshire and Oxfordshire, have already closed their schemes.

Alison Garnham, chief executive of Child Poverty Action Group, said:

“In the long-run tax payers will foot a higher bill if low-income families can’t stop a one-off, unforeseen expense from becoming a full-blown crisis – and the human cost will be high. For mothers leaving violent partners or youngsters moving on from homelessness or care, the schemes can make the difference between managing or not.”

Helen Middleton of the Furniture Reuse Network, whose member charities work closely with councils on helping low-income families, said the decision showed the government had “no real understanding of the levels of poverty in this country”.

Homelessness charity Centrepoint said young homeless people used local welfare schemes as a vital safety net:

“It’s completely unacceptable that young people who have fought to turn their lives around after facing homelessness are once again left to sleep on floors for lack of something as basic as a bed.

“Ministers must look carefully at responses from councils to this announcement and consider whether their proposal really reflects the level of poverty in many of our communities.”

Matthew Reed, chief executive of the Children’s Society, said:

“The government’s decision to reduce annual funding from £172m to £130m will make it harder for councils to support vulnerable families facing a crisis. The requirement that town halls fund their schemes from within existing budgets may create a postcode lottery for many families in poverty.”

Source –  Welfare Weekly,  18 Dec 2014

http://www.welfareweekly.com/cuts-local-welfare-schemes-christmas-present-loan-sharks/

Hidden debt epidemic from pay day loans hits North East teens

Desperate North teens are saddling themselves with payday loan debt with the help of their parents, it is claimed today.

A shock report by Action For Children has unearthed “worrying levels of borrowing” in the region among young people aged from 12 to 18.

Research by the charity reveals one in eight borrowed money from companies and an alarming 41% said they had used a payday loan company.

While it is illegal for anyone aged under 18 to get credit, Newcastle’s Citizens Advice Bureau (CAB) said staff had dealt with cases where parents or guardians had sought payday loans on a youngster’s behalf.

And bureau Chief Executive Shona Alexander said the hidden debt epidemic is leading to relationship breakdown within families as teenagers – the age group most likely to be on a zero hours contract – struggle to repay relatives.

It is a serious problem,” said Shona, who called for the credit age to be raised to 25. “We know that young people have forged the signatures of adults and that they have pressured parents or grandparents into getting a loan for them or being their guarantor.

“When they can’t pay them back, the adult’s credit rating is seriously damaged and then it is not just a debt problem but a relationship problem.

“Young people don’t know how to manage money. Something needs to be done.”

Frontline staff see young people seeking debt money to replace household goods, set up their first home or keep up with pals. High street lenders, including store cards, were used by a third (38%) of those able to get credit, the survey said.

Action For Children said the Government must fund more debt education to stop another generation of young people from a cycle of debt and bad credit.

It comes as the charity publishes its Paying The Price report ahead of Christmas amid fears the expensive festive season could be a trigger.

The report unveils how that 55% of children have not received any financial education.

And of those who had, 87% learnt from parents or carers while just 27% learnt about money at school.

The CAB added its Stockton branch had run a successful service helping to educate young people on the dangers of debt which had now disappeared because of public sector cutbacks.

Shona added aggressive marketing campaigns from payday loan companies were attractive to young people and credit firms were likely to change tack after reforms in 2015 to sell more guarantor-style short-term loans.

“Young people don’t understand interest rates and they don’t get into the regular habit of saving,” she said. “We have really got to start education at primary school age and keep that going. Too much of the debt education that we have is short-term.”

John Egan, Action for Children’s operational director of children’s services, said by becoming bogged down with debt from a young age, countless young people from the region could have their future marred by unemployment and mental health problems as a result.

He said: “High interest products and companies are now far too easy for young people to access.

“Some young people are less likely to have the financial skills they need, they may have to live on a low income or are not in education. They are also not able to learn about money at home or at school where other young people do. Add in baffling financial jargon and a lack of knowledge will dramatically create a vicious circle of debt, increasing the risk of mental health problems and unemployment.

“We cannot afford to let children pay this price because of a simple lack of financial education. They must be equipped with the necessary skills to make informed money decisions to give them a chance of a happy future.”

Source –  Middlesbrough Evening Chronicle,  14 Dec 2014

Payday Lenders Changes ‘could send borrowers to loansharks’

Changes to the payday loans market could drive desperate consumers straight into the arms of loan sharks, a North-East academic has warned.

A cap on the amount that payday lenders can charge customers has been announced by the Financial Conduct Authority.

But Professor Mark Davies, of Teesside University’s school of social sciences, business and law, fears the changes will enable loan sharks to strengthen their positions in local communities.

Prof Davies, who has carried out extensive research into the payday loans market and the needs of borrowers, believes the new measures are a positive move, but will not help all borrowers.

While this is definitely an improvement from a borrower’s perspective, there are a number of remaining issues,” he said.

“In particular, it has been speculated that many payday lenders will leave the market to set up elsewhere or change their business model.

“If legitimate payday lenders leave the industry, this will leave less choice to borrowers, with the possibility of loan sharks strengthening their positions in local communities.”

The changes by the FCA will see payday loan rates capped at 0.8 per cent per day of the amount borrowed. In total, no one will have to pay back more than twice what they borrowed, and there will be a £15 cap on default charges.

The FCA hopes the new regulations will deter people from seeking loans, but Professor Davies argues it is not that simple.

A person in financial desperation, as many of these people are, cannot simply resist a loan,” he said.

“What is needed is a mechanism for identifying and targeting these people at much earlier points, before the pain of irreversible debt mounts up.”

Professor Davies is currently leading a research project to find out more about the types of consumers who consider payday loans and the consequences it has on their lives.

He has gathered detailed accounts from a number of third sector organisations and has held focus groups with people who have taken out payday loans.

The new regulations are welcome but they will not help all borrowers,” he said. “Some will return to loan sharks.

 “Loan sharks have built up strong social connections and networks within local communities that make them more culturally acceptable than lenders such as credit unions.”
Source — Northern Echo, 17 Nov 2014

£20,000 fighting fund to kick loan sharks out of Jarrow

A drive to keep people in Jarrow out of the hands of loan sharks and payday lenders has been launched – thanks to a £20,000 Lotto grant.

The cash will help raise awareness of the town’s existing advice drop-in centre at Jarrow’s Grange Road Baptist Church.

The church currently plays host to The Bridges – Your Community Bank, the trading name of South Tyneside Credit Union.

The grant, from Big Local, part of the Big Lottery Fund, will help increase sessions at the church and encourage better money management in central Jarrow.

The two-year programme will also help people looking to escape the cycle of sky-high interest rate loans.

One key element will be the creation of four savings clubs in schools, nurseries and children’s centres, to teach youngsters about saving.

Last year the bank issued 989 loans, payable back within a year, and typically for between £800 and £1,000, and totalling around £845,800, at interest rates from 5.1 per cent APR and 43.8 per cent – far lower than any payday lender.

But bosses believe the partnership has the potential to encourage many more people to approach them for safe, well-planned and responsible financial support, and for loans which reflects their ability to repay.

Janette Wynn, manager of Bridges – Your Community Bank, said:

“This partnership is an important development in helping people to get away from using either payday lenders, or doorstep lenders.

“It will raise awareness to residents that credit unions are another alternative source of borrowing instead of using payday loans and door step lenders.

“It will help adults by offering loans at far lower interest rates than they may otherwise pay, and it will also encourage them towards more responsible borrowing.”

Anne Corrigan, project co-ordinator for Big Local in Central Jarrow, added:

“This will help people to access affordable loans, reducing the numbers reliant on pay day loans and loan sharks and ultimately improving the economic stability of the community.”

Loans are typically used for home improvements, holidays, Christmas expenses, buying a car, and debt consolidation.

More information is available from Bridges – Your Community Bank on 0191 454 7677 or by emailing info@bridgesycb.org.uk, or from Anne Corrigan on 0191 428 1144 or by emailing anne.corrigan@groundwork.org,uk

Source –  Shields Gazette,  31 Oct 2014

Payday loan comparison sites target claimants in legalised scam

The Guardian is reporting that payday loan comparison sites are hiding £75 charges for their services in their small print and are specifically targeting benefits claimants.

Visitors, who often do not even get a loan, are having the money taken from their account and their bank details passed on to up to 200 other payday loan brokers, who may also try to take money from the same accounts.

In August alone, Nat West says that there were a million attempts by payday loan brokers to take money from customers’ accounts.

Astonishingly, the scammers are usually authorised by the Financial Conduct Authority, who have given over 5,000 licences to payday loan brokers before actually beginning to check up on them.

According to the Guardian:

“NatWest said it is seeing as many as 640 complaints a day from customers who say that sums, usually in the range of £50 to £75, have been taken from their accounts by companies they do not recognise but are in fact payday loan brokers.”

The banks also claim that scammers:

“. . .push their charges through bank payment processing systems between midnight and 3am, knowing that state benefit payments are added to accounts just after midnight. When the person living on unemployment or disability benefit wakes in the morning, they find their money has already vanished.”

Read the full story in the Guardian

Source –  Benefits & Work, 29 Oct 2014

http://www.benefitsandwork.co.uk/news/2922-payday-loan-comparison-sites-target-claimants-in-legalised-scam

DWP brings new hope to payday lenders

In a move that will bring new hope to struggling payday lenders, the DWP have extended the waiting days for employment and support allowance (ESA) and jobseeker’s allowance (JSA) from 3 days to 7 days from today.

The new rules mean that claimants applying for ESA or JSA will not be entitled for any payments during the first 7 days that they would otherwise be eligible for benefits.

Claimants will not be affected if they have made a previous claim for ESA or JSA in the preceding three months, however, as they will be considered to have already served their waiting days. ESA claimants will also not be affected if they have claimed statutory sick pay immediately before claiming ESA.

Terminally ill claimants are exempt from serving waiting days.

The move has brought condemnation from trade unions and charities, but the chancellor, George Osborne, argues that: “Those first seven days should be spent looking for work and not looking to sign on.”

Last month Wonga was forced by the Financial Conduct Authority to write off £220 million in loans interest and charges to people who should never have been given loans in the first place. There have been calls for other payday lenders to suffer similar penalties.

But the decision by the Coalition to extend the waiting period for ESA and JSA to seven days means that there is likely to be an upsurge in applications for short-term loans by people with no other resources to fall back on.

Given that waiting times for a first payment of Universal Credit (UC) are likely to be around 6 weeks – and up to six months for people whose earnings were too high, according to new government proposals – and bearing in mind that UC also includes a housing costs element, the future for payday lenders is beginning to look rosy again.

Source –  Benefits & Work,  27 Oct 2014

http://www.benefitsandwork.co.uk/news/2919-dwp-brings-new-hope-to-payday-lenders