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Welcome to Wongaland

John Green looks at the background and modus operandi of payday loan company - capitalism's most recent and abhorrent abomination

Usury is defined as lending money at unethical interest rates. The practice has been condemned ever since money became the chief means of undertaking transactions.

Some of the earliest known condemnations came from Indian Vedic texts. Similar condemnations can be found in religious texts from Buddhism, Judaism, Christianity and Islam. Throughout history, many nations from ancient China to Greece and Rome outlawed loans with any interest. Though the Roman empire eventually allowed loans with carefully restricted interest rates, the Christian church in medieval Europe banned the charging of interest at any rate. How civilised our forebears were.

Today the Christian churches have little to say on this important issue and the wealthy Islamic states have no qualms about investing globally and profiting from interests on loans. Governments, too, see no need to introduce legislation to protect the most vulnerable from loan sharks and unscrupulous financial operators, although so-called "payday loan" firms, which often lend to those who cannot obtain loans from high street banks, are currently the subject of a Competition Commission review.

The ubiquitous lending firm Wonga - "the payday loan alternative" - recently reported pre-tax profits of £84.5m for 2012, an increase of 35 per cent on the previous year. It is symptomatic of the immoral and unscrupulous times we live in that a company like this can operate and flourish with impunity. This government has made no attempt to curb its predatory activity.

The company has a representative APR of 5,853 per cent - although a typical advance of £200 for 14 days would incur fees and interest of around £34. But the company knows from experience that borrowers can rarely pay back in time, thus incurring high interest rates - that's how it makes its money.

Its chief victims, of course, are the poor and those who find themselves in temporary financial difficulty ie those least able to repay the loans on time - if at all - so that in the meantime they have to fork out horrendous sums in interest.

The result is misery, mental health problems, family breakdown and homelessness.

In the old days the local loan shark would do his rounds, knocking on the front doors of those likely to be in need. Today loan companies use the internet - it's cheaper for them and anonymous.

Wonga's South Africa-born chief executive Errol Damelin is coining it. He set up Wonga in 2007 with business partner Jonty Hurwitz - and now employs 500 people, making 3.5 million loans last year totalling £1bn, which was a 40 per cent rise on the previous year.

Damelin has a £30m stake in the company based in Camden, north-west London. Damelin was educated at Boston University in Massachusetts and Cape Town University, and founded his first company in Israel.

In a rare public expression of disgust by religious bodies, the Archbishop of Canterbury, called's high interest rates "shocking" and "usurious." He promised to compete it out of existence by setting up a Church of England credit union.

What is equally insidious is the way other companies and organisations that should know better, are jumping on the Wonga bandwagon.

Wonga sponsored free travel on the London Underground on New Year's Eve in 2010 and posters were put up on the network with the slogan "sometimes you need some extra cash" and giving the website details.

London Assembly Member Jennette Arnold said that it was "shameful" that the mayor of London had allowed such sponsorship at a time of year when people are most vulnerable financially.

Transport for London later banned payday loan companies from sponsoring their services.

In October 2012 Wonga announced a sponsorship deal with Newcastle United football club for £8m a year. Several MPs spoke out against the deal and the leader of Newcastle City Council said he was "appalled and sickened" that the club had signed a deal with "a legal loan shark."

In July this year Newcastle United player Papiss Cisse courageously refused to wear the kit. In 2012, sponsored ITVs Red Or Black, which also evoked wide criticism. In January it was announced that the firm will sponsor the British showing of US Idol on Channel 5 for Season 12.

Ordinary working people and particularly the poor are those who always suffer most in times of crisis. We are not only being made to pay for the incompetence and greed of bankers, but also being ripped off by such so-called loan providers.

But the ruling elite doesn't care. It takes the same attitude as its heroine Margaret Thatcher did when she remarked to the then French president Francois Mitterand, who was planning to bring in legislation to tax the rich. "But Francois, why do you want to tax the rich, there are so few of them, it's much better to tax the poor as there many more of them."


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