To borrow £265 for 31 days from short-term, on-line lender Wonga http://www.wonga.com will cost £88.21 in interest and fees. Total to repay: £353.21. “Typical APR 2689%,” says Wonga.

These figures were shown on its website today, Tuesday 28th September 2010. The site goes on to justify the high rates that they charge.

“Yep, we know. It’s huge. But there’s a simple reason for this and we’re more than happy to explain… Much like traditional lenders, we could use fixed fees, long term products and small print to dramatically shrink our annual percentage rate (APR). Yet the beauty of our short term service is its unique flexibility and complete transparency - and that’s something we won’t compromise just to appear more conventional.”

There are plenty of talking heads willing to spout about fairness and consumer rights. For example, work and pensions secretary Iain Duncan Smith: “The very people that can least afford it end up paying interest rates… staggering, shocking figures.” http://www.bbc.co.uk/news/business-11390643

Business secretary Vince Cable, speaking to the recent Liberal Democrat party conference: “Capitalism takes no prisoners and kills competition where it can, as Adam Smith explained over 200 years ago. I want to protect consumers and keep prices down…” http://www.guardian.co.uk/politics/2010/sep/22/vince-cable-full-speech

Ed Miliband’s Labour leader’s acceptance speech referred to the gap between rich and poor. http://www.independent.co.uk/news/uk/politics/ed-miliband-elected-new-leader-of-labour-party-2089668.html

But who is looking at regulating the outrageous rates charged by payday lenders among other short consumer credit providers? Not the FSA because it doesn’t regulate credit and personal loans. It is the job of the Office of Fair Trading, yet its June 2010 final report on its “Review of high-cost credit” “…found that, in a number of respects, these markets work reasonably well.” http://www.oft.gov.uk/OFTwork/credit/review-high-cost-consumer-credit/

It went on to say that it was not within its remit “…to tackle the wider social, economic and financial context in which high-cost credit markets exist…” That presumably would be down to the talking heads then?

The chances are that those who read this blog post will be financial sophisticates, such as those who work in financial services or in the financial press. Most likely you will have been drawn to read this by the incredible 2689% that headlined this piece. I put it to you that such a lending rate shames our industry. And also our country that fails to deal with the circumstances that allow the poor to borrow at such rates, making them even poorer. If self or imposed regulation in the financial sector mean anything at all then they should mean that such charging behaviour be outlawed while the problems faced by those on whom Wonga and co prey be helped with education and very tight, rigorous and careful supervision to put them back on a even financial keel. We have a moral duty of care to do so.