Payday Lenders Benefitted the Most in Recession
Seems payday lenders are the biggest profit gainers in the UK. Analysis by the Bureau of Investigative Journalism has shown that turnover of nine out of 10 payday lenders has doubled in the last three years.
Wonga, the largest lender in the UK, has reported a significant rise of 36% in its profits since the beginning of recession in 2011.
Due to the slow economy, households opted out for various options like payday lenders for borrowing, as conventional banks stopped lending in this period. In this time, crisis funds assistance by the government was also withdrawn, therefore, people were left with only payday lending option.
In payday industry, annual interest rates are much more than the rates opted by mainstream banks and a borrower might have to pay more amount in case a single payment is missed or the loan is extended.
A review conducted by the Office of Fair Trading has revealed that main revenue collecting factor in this period for the lenders was rolled over loans.
It is found in the analysis that before these three recessions hit years the payday lenders had a turnover of about £300m. While in the slowdown period the top 10 lending firms have shown a total turnover of about almost £800m.
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