I don't watch vast amounts of television, but my attention was drawn recently to an advert for something called Wonga.com (no, there's no link, for reasons that will become obvious). Cheaply made, the advert explains how you can borrow small(ish) amounts until payday with little hassle and immediate decisions on whether or not you will be approved.
Yes, another opportunity for people to get into debt and, as a concept, probably filling a niche in the market. However, such services come at a cost, and I was intrigued to find out what that cost might be. The answer was a typical APR of 2,689%, the sort of rate that one associates with large gentlemen in ill-fitting suits calling at your door at unexpected moments and offering you the use of your fingers back in due course.
Let's put that into context. If you were to borrow £200 for twenty days, the interest would amount to £40.53, i.e. interest would accrue at more than 20% in the short period of the loan's existence - assuming that you could pay it back at the end of the term. There is also a £5.50 transmission fee to be added on, making the total cost of that loan £46.03. Now compare that with an unapproved overdraft at, say Santander, at 19.9% annually, and you can see why I take the view that I do.
Now I wouldn't necessarily say that such lenders should be banned, as people should take responsibility for their own stupidity (and if you're borrowing at that sort of interest rate, you might not be the sharpest pencil in the box), but there is a good question as to the appropriate level of regulation to be applied. After all, if people get into serious debt as a result if using such services - and 'serious' is entirely relative to your income levels - ultimately, society suffers through consequential losses.
So, I will be interested to hear how the Government responds when this question is raised in the Lords next Thursday. One assumes that, given their desire to introduce better, more effective regulation of the financial sector, this would be one of the areas they might want to prioritise.