Innumerate Archbishops

[drplokta]

Heard the new Archbishop of Canterbury (soon to be our local vicar, pretty much) on Radio 4 at lunchtime saying that credit unions should be able to compete with Wonga while offering APRs of 70% or 80%, rather than Wonga's 5,500%. However, a quick calculation shows that if you're doing two week loans with a 7.5% default rate (which I believe is pretty much Wonga's averages), you need to charge an APR of 556% merely in order to cover your defaults, without taking into account administrative overheads or the actual cost of the capital.

Comments

[vicarage.livejournal.com]

And wasn't there a fuss about moneylenders in the Temple?

[watervole.livejournal.com]

I believe that was more to do with them doing it actually in the temple, then with money-lending per se. (though I could be wrong)

[watervole.livejournal.com]

Indeed. I think some of the pay day loan companies are actually above board and providing a wanted service.

I heard some interviews a while back with people who use them -and most of them were happy with the facility. Made me rethink.

[anef.livejournal.com]

Still a big difference between 556% and 5,500%. I think pawnbrokers charge more like 1,000% APR, which strikes me as less exploitative, though obviously it's secured so the risks are much lower.

[fjm.livejournal.com]

Yup. I don't talk about this much but my dad is a pay day loan lender. He is getting out of the business because the default rate has soared (he says without the Protestant guilt about debt, younger people just don't have a problem with failure to pay) and that means interest rates have to go up to cover the default.