Loan sharks in the UK: More than 4,000 percent annual percentage rate

There is hardly a developed country, households are heavily in debt as in the UK. Business with legal usurious loans blooms.

The is just a click away small loan via “Ten-minute money,” the British company called Quick Quid promises ( “Fast pounds “) on its website. Who needs a manageable sum of money quickly gets here within a few minutes a cash injection. The helpers offer their strapped customers without many formalities short-term loans. The so-called “Payday Lender” offer bridge loans, which a few hundred pounds not normally exceed. Ideally, the debtor pays back the money when he gets his next salary. But the lending rates are horrendous.
Inflation hits especially the low-income earners.

The niche industry is a crisis winner. An economic downturn and banking quakes have helped her to a rapid boom, as millions of Britons find it increasingly difficult to maintain their standard of living. Especially those with low incomes, the drastic increase in inflation eats into the budget. The increase in VAT also hits the poor particularly hard. Many who are actually looking for a full-time job, only part-time work because of a severe recession, the economic recovery in the UK is largely failed. Many citizens have also been charged high debt for house purchase and consumption in the fat years before the crisis.

Life on credit has become in Britain for widespread disease. The figures are alarming: Hardly any industrialized country, households are heavily in debt as on the island (see chart). But traditional banks are increasingly reluctant to plug the holes in the budget coffers of the British with another loan. The banks themselves are buffeted by the financial crisis and have to reduce their risks.

Dizzying fees

When the bank manager turns his credit tap, to help find the only lax regulated, but legal Kingdom market for “Payday Lender”. Financial service providers with names like Quick Quid, Payday Express and Speedy Cash waving their pound notes. One of the best-known provider, which was founded four years ago, start-up company Wonga. He offers “great value for money”, the founder Errol Damelin says. However, his fees are staggering.

Who today Wonga (a slang term for “dough”) borrows 100 pounds must pay back 137 pounds in a month. Annual percentage rate: 4,214 percent. The Wonga-boss does not dispute this. The annual interest rate is irrelevant because the customer indeed borrowed the money for a few weeks, says Damelin. “The penalties for the overdraft your bank account cost you more.” The eloquent entrepreneur sold his costly loans as non-bureaucratic assistance for emergency situations: “A loan from us is like a taxi The is also expensive, but who goes every day by taxi to work..”

On average, eight other loans

Consumer advocates, however, see the completely different. Two for the Money from the Internet bring already highly indebted citizens even more in trouble. At the British consumer advice Citizens Advice Search now four times as many debtors of the credit providers such as Wonga help than they were two years ago. “On average, these people have been eight other loans,” says the managing director Gillian Guy.

In fact, the repayment of the financial companies in many cases will readily extend again and again, consumer advocates say, and demand to ban just that. From a short-term bridge financing otherwise become a permanent loan to the exorbitant price. Who could not pay at the end, get to do it with frequently occurring aggressive debt collectors? The youth is the main losers of economic misery. A quarter of citizens who register personal bankruptcy in England and Wales are between 25 and 34 years old.

Fear of criminal loan sharks

The flourishing business with the money worries of the British always attracts new providers. Meanwhile explore, increasingly in American companies, who are struggling in their home market, some with stricter regulation, the terrain on the island. Market researchers estimate that the volume of such emergency loans in the UK between 2007 and 2010 to 1.7 billion pounds has more than tripled. The Supervisory Authority Office for Fair Trading has been announced to screen more accurately than before in the new year, the business practices of the sector. But the government is reluctant: If the sector will be heavily regulated, benefited only criminal loan sharks, their conditions were much worse and could be not controlled by the state.