Tagged: 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

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

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/

Tory Minister Joins Calls For U-Turn On Local Welfare Cuts

This article was written by Patrick Butler, social policy editor, for The Guardian on Wednesday 26th November 2014

A Conservative minister has joined growing Tory opposition to the government’s proposals to slash funding for local welfare assistance, which provides emergency help to Britain’s poorest citizens.

Amber Rudd, the minister for climate change, said she had been “fighting” to persuade the Department for Work and Pensions (DWP) to reinstate the £180m a year funding for local authority welfare schemes.

Local welfare assistance, which replaced the old nationally run social fund 18 months ago, provides “safety net” support for low-income families tipped into sudden crisis as a result of homelessness, domestic violence, flooding, illness or sudden financial setback.

Rudd, the MP for Hastings, and a former Treasury whip, is the most senior Tory politician to demand the government reverse plans to scrap central funding for local welfare schemes from this April.

She told BBC Radio Sussex: “We all locally who care about the most vulnerable in society are fighting very strongly to make sure the government reconsiders.”

Separately, Tory-run Essex county council has written to ministers to warn the proposed cut would leave vulnerable people without help and at the mercy of loan sharks.

The council’s leader, David Finch, said:

I want ministers in London to think again and keep funding in place because the consequences of families going through crisis for longer will be far more expensive.”

Other senior Tories who oppose the scrapping of local welfare funding include: Keith Glazier, the leader of East Sussex county council; David Hodge, the leader of Surrey county council; Sir Merrick Cockell, a former leader of the Local Government Association (LGA); and Louise Goldsmith, the leader of West Sussex county council, who has call the plans as “a cut too far”.

A decision on the future of local welfare funding is expected in December alongside the local government funding settlement.

Rudd accused the DWP and the Department for Communities and Local Government (DCLG) of trying to offload accountability for local welfare on to each other, and promised to “hold ministers’ feet to the fire so that somebody takes responsibility for it”.

Although Rudd said she believed that local government needed to make cuts, it was “too hard” on councils to be expected to run local welfare assistance schemes without separate DWP funding. Councils have experienced an average 37% cut in budgets over the course of this parliament, with more financial pain to come.

The government insists councils can continue to fund local welfare from within their central grant. But the LGA has warned that withdrawal of funding will mean one in six councils will be forced to decommission their schemes, leaving tens of thousands of families without state help.

In a joint letter to ministers with the charities Child Poverty Action Group (CPAG), the Children’s Society and Crisis, the LGA says that scrapping local welfare “will have an acute impact on vulnerable residents and their children and will mean they have nowhere to turn in their time of greatest need”.

Naomi Ridley of Hastings Furniture Service, a charity which has worked closely with other Sussex charities to win cross-party support to save local welfare funding, praised Rudd’s intervention:

We enthusiastically welcome the support of a government minister for the campaign, and hope she can convince her colleagues that abolishing the fund is a terrible, short-sighted mistake with vicious consequences.”

Charities which work with families in poverty have also stepped up pressure on ministers to protect local welfare funding. The work and pensions secretary, Iain Duncan Smith, was told during an official visit to a charity “furniture bank” in Ipswich last week that his proposals would penalise the most vulnerable members of society.

> Like his decisions so far haven’t ?

The Furniture Re-Use Network whose 250 members have seen requests for help for secondhand goods, such as beds and fridges, rocket during the past 18 months, said councils were failing to keep pace with an explosion in poverty. It accused ministers of ”having no idea of the scale of unrecorded need of in-crisis households.”

The DWP announced in January that it would stop funding local welfare assistance after 2015, despite promising during the passage of the Welfare Reform Act in 2012 that it would conduct a review of the policy before making a decision.

After being threatened with court action over this decision by Islington council and CPAG, however, the government promised in September to reconsider its position and issued a consultation.

The consultation, which closed on Friday, has been criticised because none of the three choices offered to consultees involve continued funding. The housing charity Shelter called it “a cheap pavement shuffle cup trick”.

The Guardian’s investigation of the scheme in April found widespread chaos: in many councils local welfare was underspent, under-advertised and underused. Record numbers of families needing help were turned away and “pushed into the arms of payday lenders and loan sharks”.

A government spokesperson said:

The changes made to funding of local welfare provision were never about abolishing support and it’s a total misrepresentation to suggest they were.

“This government has given councils more control because they understand
best their local area’s needs – this is in contrast to the previous
centralised grant system which was inflexible and poorly targeted.

“We have completed a consultation on how funding should be provided for 2015/16 and will publish the results shortly.”

Source –  Welfare Weekly,  26 Nov 2014

http://www.welfareweekly.com/tory-minister-joins-calls-u-turn-local-welfare-cuts/

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

Man forced to deal drugs after loan shark torture threats

A desperate man was blackmailed into becoming a drug dealer when loan sharks demanded £27,000 after he borrowed just £2,000.

Ryan Craggs was sent torture threats, warned that his wife would have acid thrown in her face, while his son was actually attacked.

During the terror campaign, where the lenders demanded more and more money, the family’s horse had its throat cut.

Loan sharks would turn up and take vehicles belonging to the family, which they said would reduce but still not settle the enormous debt.

Newcastle Crown Court heard, with the interest rate rising every day, Craggs, of Avon Crescent, Fence Houses, agreed to sell drugs in return for the debt being wiped out.

The 36-year-old was caught by the police in August last year with 48 wraps of crack cocaine hidden behind the ashtray compartment in his car while driving along Front Street in Fence Houses.

He confessed he had been selling £20 deals to customers for about three weeks.

Craggs pleaded guilty to possession with intent to supply and would usually have faced years behind bars.

But Judge Paul Sloan QC told him:

“Unusually, and I state this in open court, there is independent evidence to corroborate much of what is said. This is clearly an unusual case.”

The judge sentenced him to 16 months’ imprisonment, suspended for two years, with supervision and 120 hours’ unpaid work.

The judge told Craggs:

“I accept the circumstances and that you are thoroughly ashamed of your involvement.

“Unusually, most of your basis of plea was not disputed.”

The court heard Craggs had borrowed £2,000 at a time when he was unemployed and needed help to support his family.

He paid back £3,200 after being forced to sell his quad bike, but was told he still needed to pay more.

The situation turned nasty when he was unable to meet the payment demands.

Reading from his basis of plea, prosecutor Bridie Smurthwaite said:

“Threats were made to his daughter’s horse, which had its throat cut.

“There was also threats to his wife’s horse and his mother’s horse.

“A quad bike was taken and he was told one thousand pounds would be deducted from what he owed for that. He was also told if he didn’t get the money, his son would ‘get it’.

“His son was attacked, pulled off his scooter, his helmet pulled off and assaulted.

“At one point, he was told he owed £27,000. He was then told if he didn’t pay the money back, he would have to work for the lender.”

The court heard Craggs was pressured to work as a driver for the criminal gang in the summer of last year.

Miss Smurthwaite added:

“He did so because of what had previously happened.

“He and his wife were repeatedly subjected to threats to torture them, threatened there would be acid poured in his wife’s face.”

The court heard the lenders took Mrs Craggs’s car from her, which they said would reduce the mounting debt.

The worried dad agreed to the demands he should start dealing in the hope that he could finally free himself from the lenders.

He told detectives he had been selling £20 deals and had made about £10,000 for the lenders in the three weeks he was dealing.

Miss Smurthwaite said:

“He would not have supplied drugs but for the threats that were made and the intimidation he was subjected to.”

Source –  Sunderland Echo,  23 Oct 2014

Work Programme Isn’t Working, Say Local Authorities

Local authorities across England, Scotland and Wales are issuing a call for a radical re-think of welfare-to-work policies.

The Industrial Communities Alliance, the all-party association representing more than 60 local authorities in Britain’s older industrial areas, says that welfare-to-work policies have nearly always been based on the false premise that there are plenty of jobs available.

The Alliance also says that the unemployed are now being blamed for their own failure when the true cause lies with the weakness of so many local economies.

> the unemployed are now being blamed for their own failure – now ?  You mean like that hasn’t been government policy right from the beginning ? 

Well its nice that they’ve finally caught up with reality, but I do wish they’d spoken out before… like several years ago.

In a new report (pdf), the Alliance highlights disturbing evidence on the failure of current welfare-to-work policies:

  • Participants on the government’s flagship Work Programme are almost twice as likely to be sanctioned as to find sustained employment
  • The official target is still that only 36 per cent of Work Programme participants will secure sustained employment.
  • The Work Programme is failing claimants with health problems or disabilities – only 11 per cent of new claimants of Employment and Support Allowance are finding sustained work after two years, and only 6 per cent of claimants transferred across from Incapacity Benefit

In older industrial Britain the numbers out-of-work on sickness and disability benefits generally outnumber the conventional unemployed (on Jobseeker’s Allowance) by two-to-one.

The Coalition Government in Westminster and the Labour Opposition are both considering devolving more responsibility for welfare-to-work away from Whitehall. The local authorities in the Alliance are calling for more fundamental changes:

  • A greater emphasis on growing the economy in weaker local labour markets
  • A targeted job creation programme to provide routes into work
  • A new focus in welfare-to-work on the obstacles of low skills and poor health
  • Less emphasis on compulsion, more on working by consent

Cllr Terry O’Neill, Chair of the Industrial Communities Alliance, said:

Most men and women have a fair grasp of their chances of finding work, and the value of the help on offer. Welfare-to-work should be about supporting them in ways they find relevant and appropriate.

“Too often it has become the mechanism for imposing punitive and unnecessary sanctions, fuelling business for food banks, pay-day lenders and loan sharks.”

Bernard Pidcock, Manager of the Citizens Advice Bureau in Blyth, Northumberland, adds:

“Every day we see decent men and women not only being pushed onto failing welfare-to-work programmes but also being squeezed financially by welfare cuts. This adds up to little short of a vendetta against many of the most disadvantaged in society.”

Source –  Welfare Weekly,  18 Oct 2014

http://www.welfareweekly.com/work-programme-isnt-working-say-local-authorities/