Sheryl Mcintosh's Blog: Wonga on the edge

Now here is a tale of real disgrace for New Labour and then Tory ambivalence only late turning into action. I won't shirk when it has been so wrong for so long.

Wonga is about to go under, announcing another huge loss is coming and three years of huge losses on such a small lending book with the regulatory environment against it - it's curtains. Wonga will be a thing of history soon.

Way back in 2007, when Gordon Brown (who was much worse than May, let's not forget this - she is inactively terrible, he was actively malign), surveyed all, Wonga was set-up. The premise was, in this time of ultra cheap credit, that some people could not get any. Not Wonga obviously, they got a nice cheap credit line, but there game was usurious lending to the desperately poor. To me, this is like betting on the increase in food prices - just morally wrong.

But in those heady days, anything went and the Regulator was happy to approve the business. Soon enough it grew large on the often over 1000% APR returns it managed to create. However, built on immorality from the start, the business soon festered. To chase clients, they pretended to send letters from law firms to chase for money back.

By 2012 Wonga had become a target for everyone. Even the new FCA could see it and finally steamed into action, capping its insane interest rates and allowing customers to claim back the usurious monies extracted from them. Quickly the business started to fall, unfortunately driven too by a rise in competition - at least though this restricts interest to a mere 300% per year.

So here we are in 2017, struggling under the weight of its past, Wonga will die.

But really, how on earth was this business ever allowed to exist. Desperate people need money and it can be very hard to get. Yes, there are back street lenders and criminals who purvey this sort of thing - but they are no legal, they have no claim other than threatening physical violence. To allow to pass into law and common practice such usury is a terrible stain on the Labour Government - THE LABOR GOVERNMENT! Not helped by the incoming Tory administration who at least have overseen a regulation of this business - but, to me crazily, still allowed it to exist.

It is a sorry story and one which really shows how distant politicians are from both the people they serve and the basic principles of economics that they would ever allow this carry on.