Yahoo Finance Ed Miliband Takes On The 'Wonga Economy'
The Labour leader has launched an attack on our "Wonga economy" saying payday lenders are "running riot through our communities".
Ed Miliband accused the firms of preying upon vulnerable people then intimidating them with bullying tactics when they failed to repay the loans.
He said they had created a "quiet crisis" for thousands of households saddled with debts they were unable to pay off.
In a speech at Battersea Power Station, Mr Miliband said that he had visited the Citizens (NYSE: CIA - news) ' Advice Bureau in his Doncaster constituency and heard the stories of a number of people who had become victims of pay day loan firms.
His intervention came as representatives of the three of the biggest payday lenders - including Wonga - were facing a grilling by MPs on the Commons Business, Innovation and Skills Committee.
He had spoken to one young mother who was "down to her last nappy" when she saw an advert for a payday lender on the television. He said she had succumbed to the financial pressures to take one.
Now (Other OTC: NWPN - news) , he said, the "bullying and harassment" she was being subjected to by those firms was such that she had been forced to give her mobile phone to her mother because she was getting 15 calls a day.
Mr Miliband responded angrily to the boss of Wonga, who has commissioned a film which tells the story of 12 people who have been happy with their payday loans, claiming he was speaking for a "silent majority" who were satisfied with the service.
He said: "Payday lenders don't speak for the silent majority. They are responsible for a quiet crisis of thousands of families trapped in unpayable debt.
"The Wonga economy is one of the worst symbols of this cost of living crisis."
He said that seven out of ten customers customers said that they regretted taking out a payday loan, with half saying they were unable to repay it.
He said the woman who ran his local Citizens' Advice Bureau had told him: "Payday lenders are running riot through this community."
However, Henry Raine, head of regulatory and public affairs at Wonga, told the Commons Business, Innovation and Skills Committee: "Wonga's business is aiming to lend to people who can pay us back, that's how we make money.
"The vast majority of people pay us back on time. We freeze interest after 60 days and 25% of people pay us back early."
Mr Raine said around 3% of loans, equating to around 40,000 of Wonga's 1.25 million customers, go to the 60-day period.
He said Wonga's record compared favourably with the rest of the loan industry, including credit card companies and banks.
But Martin Lewis, the founder of MoneySavingExpert.com, said payday lenders were essentially "grooming" the next generation of borrowers and advertising should be banned from children's television channels.
He said one in three people with youngsters under the age of 10 reported that their children could repeat payday loan ad slogans.
Mr Lewis told the Commons Business, Innovation and Skills Select Committee: "I think we are in danger of grooming a new generation towards this type of borrowing. And if you think we've got problems now you wait until 10 years' time.
"Grooming is the right term. We're talking about a market that didn't exist five years ago, and you've had people in arguing that this is how people like to use it. They've created the demand, they've created the operational structure, and now they're saying it's what people want. It's deliberately contrived and controlled."
In his speech, Mr Miliband also intensified his attack on David Cameron over energy bills and the cost of living.
He challenged coalition MPs to back Labour plans for a temporary freeze on electricity and gas charge in a Commons vote on Wednesday.
Today the Government announced it had urged water companies to look closely at whether price increases were necessary and to introduce special tariffs for hard-pressed household.
The move has been seen as an attempt to seize back the initiative on the cost of living, which is becoming a key battleground ahead of the General Election.
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