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

[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.