Nick Smith MP Labour MP for Blaenau Gwent
BLAENAU Gwent is borrowing more than £100,000 a month in pay day loans from just one provider, Nick Smith MP has revealed.
Mr Smith has obtained figures from Wonga that show thousands of people in the borough turned to emergency loans, with more signing up every day.
While Wonga would not release more a more detailed breakdown of the amount loaned, they were willing to confirm a six-figure handout for March 2013 and a 6% increase in customers on the year.
With the average customer paying 20.1% in interest for a loan lasting less than three weeks, Mr Smith said he was worried the borough could be “bled dry” by a spiral of high-interest loans.
It comes as the Public Accounts Committee, for which Mr Smith is a member, slammed the Office of Fair Trading for failing to tackle unscrupulous moneylenders who cost the public £450m a year.
In the breakdown released by Wonga, 454 loans were issued in Blaenau Gwent in March 2012 -; with 4,987 issued in 2012.
The average first-time loan was for £167, while returning customers who had built up a trust rating loaned £279 on average.
With the average loan lasting 18 days, it meant customers are paying back an extra £33.57 and £56.08 respectively.
Speaking after obtaining the figures, Mr Smith said: “The fact that people in Blaenau Gwent could be borrowing more than a million a year just to make ends meet is deeply worrying -; and that’s just from one provider.
“We all know the astronomical rates of interest that is attached to these loans, but as it gets harder and harder to pay the bills, it is clear people feel they have no other choice.
“The borough’s Citizens Advice Bureau dealt with 11% more debt problems than last year and the biggest category of that were unsecured personal loan debts.
“I have no doubt the likes of Wonga screen customers and trumpet early pay back rates, but it doesn’t hide the fact many people are struggling to cope.
“That’s not even mentioning the unscrupulous end of the market that pull stunts such as charging people just to refuse them a loan or send bailiffs round at the drop of a hat -; then charge people even more for the privilege of the bully boys at their door.”
The OFT are currently investigating 33 consumer credit firms, with 213 firms who have applied for a license under investigation for being potentially unfit to practice.
As the need for borrowing at short notice only seems to be increasing, Mr Smith said it was important those in need considered the alternatives.
“If you are struggling with debt, approaching services such as the CAB or Blaenau Gwent’s Christians Against Poverty is a better course of action than just borrowing more money and continuing the spiral”, he said.
“If a short-term loan is needed the Blaenau Gwent credit union SmartMoney are a real, community based alternative.
“They charge 2% a month interest as opposed to the astronomical figures the pay day lenders can rack up, while making sure those with bad debt are protected from themselves by refusing service.”
SmartMoney has 560 members in Blaenau Gwent, with services to help people with savings and money advice.
For more information visit http://www.smartmoneycreditunion.co.uk/ or call 029 2088 3751
Update – A spokesman from Wonga said: “While we don’t comment on individual constituencies, there are very good reasons why Wonga is now a popular mainstream consumer credit choice throughout the UK. Hundreds of thousands of people every month value our convenient, transparent, flexible and often cheaper alternative to bank overdrafts and credit cards.
“As a responsible lender, we welcome Mr Smith’s recognition of our loan decision-making technology, which turns down the majority of first-loan applications, and our early payment facility, with nearly a quarter of all loans repaid before they’re due. We also share his concern about unscrupulous payday lenders and indeed at the Public Accounts Committee -; of which he is a member -; we supported calls for better regulation of the short-term lending sector.”