Focus on Irish moneylenders amid Wonga woe
Shares in UK money lender Provident Financial — which has a large operation in Ireland — rose in London after British payday lender Wonga stopped accepting new loan applications, amid questions over Wonga’s survival.
Struggling Wonga — which is best known in Ireland as the shirt sponsor of Newcastle United — only weeks ago completed a £10m (€11m) cash call.
The privately-owned firm said on its website: “While it continues to assess its options, Wonga has decided to stop taking loan applications.
“If you are an existing customer you can continue to use our services to manage your loan.”
A company spokeswoman declined to comment further.
Wonga, which initially enjoyed rapid growth via its short-term, high-interest lending often to troubled borrowers, fell into difficulty in recent years after scrutiny of its practices led to a cap on interest on payday loans.
It doesn’t operate in the Republic and the cost of credit it cites, of up to 1,500% annual percentage rate (APR) on its short-term loans of over a number of months, is many multiples of that charged by money lenders authorised to do business in the Republic.
Its troubles have, however, again put the spotlight on Irish moneylending firms.
Paul Joyce, senior policy analyst at Flac, the Free Legal Advice Centres, said the Irish regulations set out the maximum rates charged. “It is no doubt it is expensive credit,” Mr Joyce said.
“It does cause problems for people. But I find that money lenders do not sue people”, adding that their censure is to cut off access to future loans if borrowers do not repay in time.
The Central Bank register shows there are 38 regulated money lenders across the Republic, many operating in Cork and Dublin.
The firms charge a maximum interest APR rates of between 24% and 287% when collection charges are included.
Around 350,000 customers used their services last year.
The Central Bank register cites term loans provided by the lenders of between 21 and 172 weeks.
Shares in the Ftse-250 firm Provident Financial rose slightly after it yesterday named a new chairman and three non-executive directors following a year of financial troubles.
It also posted half-year adjusted profits of £74.9m which were down from £98.6m a year earlier. The firm, which is valued on the market at £1.72bn, operates across the Republic from Wexford.
Wonga was forced this month to raise £10m from investors amid a surge in compensation claims related to loans taken out before 2014.
Wonga is the biggest and most well-known firm in Britain’s payday loan industry, which has faced heavy criticism from lawmakers and campaigners who say its high-interest rates and marketing tactics take advantage of vulnerable borrowers.
It shot to prominence in Britain in the years after the financial crisis, filling the gap left by big banks as they retreated from short-term lending.
At its peak in 2012, it was making a pretax profit of over £1.5m a week. Six years on, Sky News reported Wonga was on the brink of collapse.
It reported last weekend its directors were preparing to appoint administrators within days. Wonga’s most recent accounts show it made a loss of £66.5m in 2016.
