Nov 14, 2013 Simon Williams
At this point, the short term lending industry should not have to be defended to anyone. The sector proved itself and its worth during the economic recession, when companies therein were among the only ones in the United Kingdom to support the financial needs of citizens.
During this time, in order to ensure they could stay afloat and that they would be repaid by borrowers, high street banks and more traditional lenders closed their doors to anyone without near-perfect consumer credit scores. While this move was probably a good strategy on their part in terms of longevity and mitigating risk, the people of the U.K. without unblemished credit histories suffered.
And this was where short term lenders built their dependable reputations. These companies were able to both eschew the risks that came along with lending to people with imperfect credit scores (by using different scoring models like the Payment Reporting Builds Credit framework) and help citizens make ends meet. But that kindness and help seen during the recession seems to have been forgotten in the U.K.
Recently, stories in the media have been plagued with government leaders and consumer advocate group representatives making statements that short term lenders are liable to damage individuals' finances. But, as we all know, nothing could be further from the truth.
As such, critical players in the lending industry are now coming out defending the practice.
Wonga leader calls business "fair"
For instance, according to The Daily Express, Wonga Head of Regulatory and Public Affairs Henry Raine recently explained to Members of Parliament that the business thoroughly vets borrowers in its own way and makes sure that these people can pay loans back, because that's the only way the short term lender makes money. This is evidenced in the fact that Raine said only 3 per cent of the corporation's 1.25 million borrowers still owed money after 60 days.
So by ensuring that borrowers are in a good place financially and just need a little temporary help, everyone wins.
Moreover, Raine noted in his speech that one of the first things that can be seen on his company's home page is a total of the fees associated with borrowing, ensuring that people know what responsibility they're taking on.
The pure fact that this particular short term lender has 1.25 million customers in the U.K. should be evidence enough that these are the types of alternative credit options consumers want and are able to benefit from.