Dear Errol Damelin, Chief Executive of Wonga,
Following your annual report, I imagine many people are congratulating you on the success of your payday lending company, how incredible it is that Wonga has pulled in over £60 million pounds worth of profit. Now, please don’t see this open letter as a personal attack on you, but I don’t want to congratulate you here. I don’t want to do that because I fundamentally disagree with Wonga, and with any other payday lending company that exists.
In fact, I feel so strongly about discouraging people from using companies like yours that I spoke on it during Plymouth City Council’s motion on notice (1 hr 39 min) which, amongst other things, called on the government to introduce caps on the total lending rates that can be charged for providing credit. Plymouth City Council itself feels so strongly about discouraging people from using companies like yours that we have taken action, banning advertisements from your company, and others like yours, from billboards and bus stops in our city, and blocked access to them from our public computers.
I suppose one of us is recognising the damaging effects that payday lending companies have on people, because you certainly are not, are you, Errol? In fact, your statement that “This is not about people on breadlines being desperate and us being a lender of last resort” suggests that you know little of, or are simply ignoring, the impact that the payday lending industry – and your contribution to it – is having on people, especially in deprived areas like Devonport, the ward I represent, and the area where I grew up. An area which battles constantly with poverty. An area where people really are on the breadline, desperate, who do see companies like yours as a last resort. A last resort after they have had their benefits slashed, the cost of living has gone through the roof and their employer doesn’t pay them a living wage like Plymouth City Council does their staff. And these people turn to you out of desperation, not out of choice.
I know that must be difficult to comprehend, as the Chief Executive of a company which makes £1 million a week, but put yourself in my shoes for a minute. I grew up in a single-parent family where we both spent a great deal of time worrying about money, my teens were spent in an atmosphere of debt which has made me incredibly fearful of debt, yet it feels almost tempting. I thought about a payday loan today, actually. My bank has removed the interest-free overdraft from my student account and I’m currently over £700 overdrawn as a result. I was almost tempted to take one out, pay off the debt, close the account, find a new bank, worry about the hefty repayment terms when my student loan comes through. I resisted, went for tea at my mum’s house, did some filing instead.
But for a lot of families in my ward – families who don’t fit into your stereotypical customer profile of “young, single, employed, digitally-savvy and can pay us back on time”, by the way – can’t resist, they have no choice but to make ends meet by taking out a loan with companies like yours. And they have no choice because yes, they are probably young, some of them may even be single, but they are probably in extremely low-paid jobs or have no job at all, who don’t have the means to be “digitally savvy”, and who cannot pay these loans back. And guess what? They end up taking out another loan to pay off the loan they can’t pay off, and then another, and maybe even another, until they’re trapped in a vicious cycle of debt that they can’t get out of. How does it feel to know that your company is contributing to those vicious cycles? Your claim that the payday lending industry “has been tarred by behaviour of other high-interest lenders” doesn’t wash with me – I’ve spoken to people on their own doorsteps who can barely afford to feed their children because the debt they have accrued through companies like yours is swallowing up every bit of income they have.
I could link you to many, many articles like this one which focus on the awful effects that the payday lending industry has on people who are already struggling to make ends meet, but I’m sure for every one I provide, you could link me back to an article praising what you do, or direct me towards someone who has the ability to pay back a short-term loan from you.
Ideally, I would like your company to cease business, but I doubt my open letter to you will be powerful enough to achieve that. In the meantime, whilst you’re considering that option, I want to discourage people from the financial trap that is payday lending, and will continue to encourage people in financial difficulty to use credit unions as championed by the Archbishop of Canterbury, such as the City of Plymouth Credit Union, so their lending doesn’t result in court appearances or bailiffs at their front door.
There have been lots of interesting ideas flying around about how we can regulate the industry to prevent credit becoming a minefield for unsuspecting victims. Plymouth City Council has called for the government to introduce caps on this type of credit. We have banned advertising of payday lending on our billboards and bus stops, and made sure your website and many more like yours are not available to access in our libraries and in our youth centres. We are doing our bit to protect the good people of Plymouth from the vultures that are payday lending companies.
You have said that “sustainability [of credit unions] means being profitable”. We parted company of opinion a long time ago, Errol, but if we hadn’t already, that would be the final straw. Its about time you stepped up and stopped making profit from other peoples’ poverty.