Wonga loans written off

Thousands of consumers who received payday loans from Wonga will have their debts written off. But if you’re one of those consumers, you may be left with some questions: when will the debt be written off, will the write-off affect your credit score and will you be able to secure loans in the future? Here is the rundown of what you can expect to come from the scandal.

The background
Wonga, the largest payday loan company in the UK, is to write off £220 million in debts for 330,000 customers after agreeing with the Financial Conduct Authority (FCA) to conduct new affordability checks. A further 45,000 customers will have interest frozen on their loans but will still have to repay their existing arrears.

The payday loan industry has been criticised for aggressive debt collection practices, irresponsible lending and astronomical interest rates. This led the Office of Fair Trading (OFT) to investigate the 50 biggest firms in 2013 to see if they were adhering to the rules. loan-write-offs

The OFT wrote to each firm, setting out the changes needed to ensure they lent legally. The FCA reported that 14 of the 50 firms responded by leaving the payday loan market. (The OFT has now closed and its remit passed onto the FCA.)

Wonga agreed with the OFT and FCA criticisms, admitting that it had not followed affordability rules and many loans should never have been issued. Wonga also agreed there was an urgent need for change to ensure it only lends to people who can afford to repay the loan.

“The FCA is right to come down hard on Wonga after it found it had poor affordability processes but it is not the only lender guilty of this; it is a widespread problem within the industry,” Gillian Guy, chief executive of Citizens Advice, said in an emailed response to questions. “Citizens Advice has found that in half of payday loans cases reported to us, lenders didn’t ask about people’s personal finances.”

What Wonga borrowers need to know
If you are affected by Wonga’s decision (and your loan is going to be written off or the interest on it frozen), you should have received an email from Wonga in early October 2014 to explain the next step.

In the email, Wonga states that it “will automatically clear any outstanding debt you have with us” by the end of October 2014. You should continue to make repayments until Wonga confirms it will write off your debt.

If your Wonga loan is cancelled, there will be no trace of it on your credit record, aside from the initial application.

“We are working with Wonga to make sure that affected customers’ credit reports are updated to reflect the position they would have been in had these loans not been granted,” James Jones, head of consumer affairs at credit agency Experian, said in an emailed response to questions. “This means that any account records for these loans are being completely removed from customers’ credit reports. The search footprints will remain, however, to reflect the fact that applications were made.”

New affordability checks
Wonga is working with the FCA to develop new affordability checks, meaning Wonga will offer far fewer loans to new and existing customers.

The changes also mean there will be greater scrutiny of loan-to-income ratios. Before, people who made late payments and customers rejected for credit reasons could immediately reapply for a loan; now, they will face an automatic block for 30 days.

“Wonga will implement measures to improve its affordability assessments to ensure customers are treated fairly and lent to in a sustainable manner in accordance with applicable regulatory requirements and guidance,” said a statement from the FCA.

There is, however, no indication that Wonga or any other payday firm is cutting interest rates, so payday loans remain a highly expensive form of borrowing.

Implications for the wider industry
Although the FCA wants to ensure payday lenders follow the law, it does not want to ban them completely.

In April 2014, FCA Chief Executive Martin Wheatley said, “We believe that payday lending has a place; many people make use of these loans and pay off their debt without a hitch, so we don’t want to stop that happening. But this type of credit must only be offered to those that can afford it.”

Because of Wonga’s large size, other, smaller payday loan firms are likely to follow the change in lending criteria.

But in reply to an emailed question asking what the implications for the industry will be, a spokesperson from the FCA said, “One investigation does not set a precedent for another. We cannot confirm or deny whether there are any other investigations underway.  Any investigation takes into account all aspects and any mitigating factors.”

Still, there is no doubt that many other sub-prime lenders have followed similar practices in the past, so other firms could be investigated and it is clear that the FCA will scrutinise the sector closely.

A further change is that, in future, consumers will be able to search for payday loans through a comparison site, making it easier to compare loans and find the cheapest. This should drive prices down and provide clearer information on fees.

Can I Make A Claim For Compensation

Injured In A Shop – Can I Make A Claim For Compensation?

Owners of all public places have a duty of care to individuals who are using those places. They must ensure that they do everything they can to reduce the risk of people being injured in their property. This includes properties which are owned by the council and owned by private landlords. Therefore if you are injured in a shop, the shop owner could be liable for your injuries. You may be able to be make a claim if you are a member of the public who has been injured in a shop or if you are an employee of a shop who has had an accident at work.

Employee Accident In A Shop

If you work in a shop and you have had an accident at work, there are certain circumstances in which you may be able to make a claim for compensation. All employers have to legally abide to health and safety legislation. If your employer has not ensured that the shop is safe for employees to work in, and this has directly caused your injury – you will be able to make a claim for compensation. Furthermore, if your employer has not provided you with sufficient health and safety training or equipment to carry out your role safely and this has led to your injury, you will also be able to make a claim for injury compensation.

Public Accident In A Shop

A shop is open to the public and therefore it should be safe for the public to enter and use. If the accident which occurred in the shop is found to be the fault of a negligent act of the shop owner, you will be able to make a claim for compensation. For example if you have been injured following a slip and fall on wet floor you may be able to claim for compensation if there was not adequate warning signage displayed. If your claim is successful the shop’s public liability insurance will cover the personal injury compensation pay out.

shop injury compensation

Image courtesy of stockimages / FreeDigitalPhotos.net

Can I Make A Claim For Compensation?

These are not the only two circumstances in which you may have found yourself injured in a shop. If your situation does not fit neatly into these two categories of accident – do not worry. Personal injury claims are complicated and everyone’s situation is slightly different. Simply give a specialist personal injury lawyer a call and they will be able to let you know whether you have viable grounds to make a claim against the shop for injury compensation.

What is money

Everyone uses money. We all want it, work for it and think about it. If you don’t know what money is, you are not like most humans. However, the task of defining what money is, where it comes from and what it’s worth belongs to those who dedicate themselves to the discipline of economics. While the creation and growth of money seems somewhat intangible, money is the way we get the things we need and want. Here we look at the multifaceted characteristics of money. (Get A Short-Term Advantage In The Money Market. This investment vehicle is often the perfect stop-gap measure for growing your money.)

What is Money?
Before the development of a medium of exchange, people would barter to obtain the goods and services they needed. This is basically how it worked: two individuals each possessing a commodity the other wanted or needed would enter into an agreement to trade their goods.

This early form of barter, however, does not provide the transferability and divisibility that makes trading efficient. For instance, if you have cows but need bananas, you must find someone who not only has bananas but also the desire for meat. What if you find someone who has the need for meat but no bananas and can only offer you bunnies? To get your meat, he or she must find someone who has bananas and wants bunnies …

The lack of transferability of bartering for goods, as you can see, is tiring, confusing and inefficient. But that is not where the problems end: even if you find someone with whom to trade meat for bananas, you may not think a bunch of them is worth a whole cow. You would then have to devise a way to divide your cow (a messy business) and determine how many bananas you are willing to take for certain parts of your cow. (It can be hard to talk about money with your children, especially when times are tough. Talking About Money When Times Are Tough has some tips to make it easy.)

To solve these problems came commodity money, which is a kind of currency based on the value of an underlying commodity. Colonialists, for example, used beaver pelts and dried corn as currency for transactions. These kinds of commodities were chosen for a number of reasons. They were widely desired and therefore valuable, but they were also durable, portable and easily stored.

Another example of commodity money is the U.S. currency before 1971, which was backed by gold. Foreign governments were able to take their U.S. currency and exchange it for gold with the U.S. Federal Reserve. If we think about this relationship between money and gold, we can gain some insight into how money gains its value: like the beaver pelts and dried corn, gold is valuable purely because people want it.

It is not necessarily useful – after all, you can’t eat it, and it won’t keep you warm at night, but the majority of people think it is beautiful, and they know others think it is beautiful. Gold is something you can safely believe is valuable. Before 1971, gold therefore served as a physical token of what is valuable based on people’s perception. (You don’t need an MBA to learn how to save money and invest in your future. Follow 8 Financial Tips For Young Adults, to find out more.)

Impressions Create Everything
The second type of money is fiat money, which does away with the need to represent a physical commodity and takes on its worth the same way gold did: by means of people’s perception and faith. Fiat money was introduced because gold is a scarce resource and economies growing quickly couldn’t always mine enough gold to back their money requirement. For a booming economy, the need for gold to give money value is extremely inefficient, especially when, as we already established, value is really created through people’s perception.

Fiat money, then becomes the token of people’s apprehension of worth – the basis for why money is created. An economy that is growing is apparently doing a good job of producing other things that are valuable to itself and to other economies. Generally, the stronger the economy, the stronger its money will be perceived (and sought after) and vice versa. But, remember, this perception, although abstract, must somehow be backed by how well the economy can produce concrete things and services that people want.

That is why simply printing new money will not create wealth for a country. Money is created by a kind of a perpetual interaction between concrete things, our intangible desire for them, and our abstract faith in what has value: money is valuable because we want it, but we want it only because it can get us a desired product or service.

How is it Measured?
Sure, money is the $10 bill you lent to your friend the other day and don’t expect back anytime soon. But exactly how much money is out there and what forms does it take? Economists and investors ask this question everyday to see whether there is inflation or deflation. To make money more discernible for measurement purposes, they have separated it into three categories:

  • M1 – This category of money includes all physical denominations of coins and currency, demand deposits, which are checking accounts and NOW accounts, and travelers’ checks. This category of money is the narrowest of the three and can be better visualized as the money used to make payments.
  • M2 – With broader criteria, this category adds all the money found in M1 to all time-related deposits, savings deposits, and non-institutional money-market funds. This category represents money that can be readily transferred into cash.
  • M3 – The broadest class of money, M3 combines all money found in the M2 definition and adds to it all large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets.

By adding these three categories together, we arrive at a country’s money supply, or total amount of money within an economy.

How Money is Created
Now that we’ve discussed why and how money, a representation of perceived value, is created in the economy, we need to touch on how the central bank (the Federal Reserve in the U.S.) can manipulate the money supply.

Among other things, a central bank has the ability to influence the level of a country’s money supply. Let’s look at a simplified example of how this is done. If it wants to increase the amount of money in circulation, the central bank can, of course, simply print it, but as we learned, the physical bills are only a small part of the money supply.

Another way for the central bank to increase the money supply is to buy government fixed-income securities in the market. When the central bank buys these government securities, it puts money in the hands of the public. How does a central bank such as the Federal Reserve pay for this? As strange as it sounds, they simply create the money out of thin air and transfer it to those people selling the securities! To shrink the money supply, the central bank does the opposite and sells government securities. The money with which the buyer pays the central bank is essentially taken out of circulation. Keep in mind that we are generalizing in this example to keep things simple. (For more information, see the Federal (the Fed) Reserve Tutorial.)

Conclusion
Remember, as long as people have faith in the currency, a central bank can issue more of it. But if the Fed issues too much money, the value will go down, as with anything that has a higher supply than demand. So even though technically it can create money “out of thin air,” the central bank cannot simply print money as it wants.