Corrosive Pay-Day Loans Should Stop

This letter appeared in the Financial Times Monday 26 November 2012

With his assertion (Letters, November 22), that APR calculations are meaningless and that banks charge even more on occasions, Errol Damelin, chief executive of Wonga, is trying once again to defend the indefensible. May I remind your readers why Wonga and the other 50 pay-day loan companies are not operating on the continent – very simple, Mr Damelin and his peers would likely be in prison under usury laws, if they plied their trade in Switzerland, Austria, Germany, Netherlands or the Nordic countries. Contracts that bear exploitative interest rates, generally above 15-20 per cent cannot be enforced in law. Repeat offenders, who try it, get a prison sentence. Maybe it is no coincidence that the above countries are the so-called creditor nations in Europe.

Usury laws protect the socially weak, uneducated, desolate and weak-willed from predators. There seem plenty of those around in the UK to feed this market. It is high time that the government acts against them, and at least they are prevented from advertising – their products are more socially corrosive than cigarettes or alcohol.

Author: Bob Bischof

German Robert (Bob) Bischof has lived and worked in Britain for 40 years. He is convinced that the two countries can gain much by learning from each other. Well-known for his outspoken comments on economic, political and industrial issues concerning Britain and Germany, he is a regular contributor to a range of newspapers and other publications, including the Financial Times and other national papers. View all posts by Bob Bischof