WONGA.COM – What you need to know before you get a loan

WONGA.com

Established in 2006 by Jonty Hurwitz and Errol Damelin and operating in various countries including South Africa, Canada, Poland and the United States, Wonger.com has been in the limelight both for good and bad reasons. Although the UK based online money lending company describes itself as a digital financial institution and trustworthy credit service provider with operating procedures similar to ordinary banks, the institution has raised grave controversies in the past owing to its way of issuing loans and collecting payment among other transaction processes and most global organization have rose to criticize it, some even ordering a stop to its operations.

The institution’s management however, has always defended its rights to be in operation, stating that the bank never forces anyone to engage in their services. There are numerous reasons why Wonger.com is considered a criminal enterprise, and why I think they should personally go to prison, these include:

Questionable Loan Repayment Methods
The institution’s mode of loan repayment is questionable and has been criticized by several other institutions, especially the Office of Fair Trading (OFT) company. The debt collection methods used by Wonga are both misleading as well as aggressive, with some of the defaulting customers being threatened via emails, phone calls and letters, that they have committed fraud and may be reported to the police.

Wonga also uses the continuous payment authority method to collect debts, which gives it permission to raid bank accounts of innocent citizens to collect thousands of pounds of loans taken by fraudsters, who apply for loans and draw the cash to an account that they have access of, and then give account details of innocent victims as the loan repayment account. For instance, in September 2012, the bank billed customers of loans that they had not received. The customers only realized later when they were either restricted from taking bank loans with a claim that they had not cleared their loans with Wonga, or when they found their bank balances reading less than the expected amount for that month.

The bank’s working directly with banking institutions to draw money from customers’ accounts without their knowledge is unacceptable and fraudulent. The criminals are in most cases never traced, and the victims end up losing thousands of pounds which are never refunded. And it is considered illegal for Wonga to withdraw money from an account other than the one it deposited the loan money into.

Unrealistic Interest Rates

Wonger.com is known to offer short term loans of between 1 and 1000 dollars payable by the borrowers’ next salary. Once the loan is approved, the cash is transferred to the borrower’s account within 15 minutes and a notification sent to the borrower either via text or email. However, these loans are issued at unimaginable interest rates of 4,214 % APR. Other charges are also involved during the transaction including a transmission fee of about 5 pounds, which is usually added to the loan amount requested and also accrues interest , as well as extension fees and late payment fees which sum up to 30 pounds and also accrue interest. All these charges are not made transparent to the borrowers when the money is being issued, and most of them end up paying back more than the anticipated amount.

Encouraging Irresponsible Debts

Wonger.com’s mode of issuing loans encourages irresponsible debts within the countries of operation, thus making vulnerable young and old people to compromise. The online banking institution went ahead and even started offering short term loans to students, who would use the cash to pay for unnecessary activities such as trips abroad.

This was viewed as an irresponsible act as it is well known that most students do not have any dependable source of income, and in most cases it would be the parents to pay for the loans, which are often short term and thus cannot assist the students in their financial plans. Since the loans target the borrower’s next income and incur great interest, it is not easy to repay and most people are left struggling thereafter. Loans are also offered for occasional emergencies as well as unexpected events, which may be of less importance and thus encouraging people to live beyond their current means.

Advanced and Questionable Technology and Programs
One other reason why wonger.com is a criminal enterprise is because it uses fully automated technology to carry out loan transactions, and does the entire process online either using computers, tablets or iPhones.

The institution has invested in a highly skilled professional IT team, which specializes in writing company-specific algorithms and programs that are used to gauge whether a borrower deserves to be given a loan or not, basing on the ability of the person to pay back.

The algorithms work by collecting details about the customers as well as their behaviors and the information is used either to reject or accept loan applications. This ensures that only a certain profile of customers get the loans, especially those who are able to pay back and the persons who are in dire need of the money are left out. It is also disturbing where the firm gets all the money that it lends to the customers.

The Mode of Advertising Its Services

The mode of advertising used by the firm has also been criticized by a majority of people. Wonger.com’s television and radio advertisements have not been spared, with the television ads being composed of three puppets that dance to music as they explain how attractive the Wonga loan model works.

The adverts are not transparent enough and do not mention the high APR which accompanies the loans. This is considered to be dangerous as most customers end up applying for the loans without being aware of the transaction and interest charges. The firm also seeks clients by sponsoring football clubs that are followed by young vulnerable people who fall victim of these tactics and end up in serious debt.

This has resulted in an alarming growth rate of the firm, with its revenues going from zero to 300 million pounds just in 6 years. However, some of the customers have always been unable to pay the loans and have ended up in hopeless debts, whose interests keep increasing by the day. This is the main cause of the fraudulent activities associated with the Wonga bank.