Today, short term lender Wonga registered a pre-tax loss of £37.3 million following a major overhaul of the company. Wonga had to write of thousands of unsuitable loans. Debts worth more than £220 million were cancelled due to a failure to assess properly the customer’s ability to pay. There are suggestions that Wonga’s loss will mean they have to undergo a complete rebrand which could convince customers to begin purchasing their unsafe products again.
In combination with the fact that, according to Bank of England data, the number of credit cards has soared due to banks making it easier to obtain a credit card, this suggests we may be heading back towards the irresponsible lending which caused the credit crunch.
The lack of due diligence given to lending is particularly dangerous given the fact that, according to our Financial Fragility Survey, only 8% of people have some form of protection for their financial products. Following the financial crash, the PPI crisis and the investigations into pay day lenders, consumers need to ensure they learn the lessons of irresponsible borrowing and to turn to alternative sources of loans including Credit Unions. Loans and mortgages from credit unions insured by Cuna automatically include Payment Waiver which ensures borrowers are protected should they face sudden loss of income. A business-to-business deal, the lender is the one taking out the insurance so that when an unexpected event occurs, repayments are automatically waived.