By Claire West
The soaring profits of more than £1 million a week by controversial payday lender Wonga was branded as ‘vulture capitalism’ by Unite, the country’s largest union, today.
The union is angry that much of the so-called economic recovery and boost in consumer spending is being fuelled by payday lenders that “prey on the financially vulnerable”.
Unite general secretary Len McCluskey said: “The fact that Wonga’s profits rose to £62.5 million in 2012 urgently reinforces the need for legislation to curb payday lenders and also for a Treasury select committee probe into this industry.
“Payday lenders are making their profits on those struggling to make ends meet on a daily basis with outrageous rates of interest that mount up with an alarming speed, causing fear and insecurity.
“George Osborne's claims of an economic recovery are partly based on an out or control industry that preys on the poor and the low paid. Osborne's ‘Wonganomics’ of relying on payday lenders to boost consumer spending will not get this economy back on track - it's unsustainable and morally wrong.
“Ted Heath once spoke of the unacceptable face of capitalism — what we are seeing in 2013 is vulture capitalism, picking wallets and purses clean.
“We urgently need the legislation being promoted by MP Paul Blomfield - the High Cost Credit bill - but thanks to Tory blocking tactics it has been delayed."
Wonga, which offers short-term loans to more than a million customers, said profits after tax rose 35 per cent to £62.5 million during 2012 - the equivalent to more than £1 million a week. It lent £1.2 billion in the year, a rise of 68 per cent.
Unite's own survey of its members revealed that those using payday lenders are borrowing around £326 per month to get by, the equivalent of one week's wages.
Key areas that Paul Blomfield’s bill would address include: reducing prime time advertising of payday loans; requirements for lenders to contribute towards debt advice; and a duty placed on the new Financial Conduct Association (FCA) to better use existing law to control bad lending and debt collection practices.