Payday lenders quizzed
The Committee was following up on a report by the Office of Fair Trading which found “deep-rooted” problems in the manner in which payday loans both attract and treat customers.
Payday lenders have come under increased scrutiny recently from both the Financial Conduct Authority and the Competition Commission since
Last month the FCA proposed new measures which will compel lenders to place “risk warnings” on promotions and advertising, urging customers to “think” before taking out a payday loan.
But the Payday Lenders were quick to defend their industry.
Henry Raine, head of regulatory and public affairs at Wonga, said: “Wonga’s business is aiming to lend to people who can pay us back, that’s how we make money.
“The vast majority of people pay us back on time. We freeze interest after 60 days and 25% of people pay us back early.”
Raine added that around 3% of loans, or 40,000 of Wonga’s 1.25 million customers, go to the 60-day period.
Andy Lapointe, UK public affairs manager at QuickQuid, also defended the process of credit checking and said in some cases it could take several hours.
When asked about advertising that states cash can be delivered within five to ten minutes he said: “The five minutes is indicating the time that they’re approved”.
Raine also responded to the Committees question on the build up of bad debt.
He said: “We do everything we can to lessen the effect of bad debt.”
When the Committee asked Raine if he thought his firms charges were extortionate he would not agree.
He said: “No, of course we don’t accept that.
“With Wonga the first thing you see on the website is the amount it’s going to cost you. You choose how much to borrow and for how long.
The committee hearing pre-empts the transfer of regulatory powers in the consumer credit market from the OFT to the FCA.