Interest rates of 30-35% per month from payday lenders like Wonga “Ridiculous,” said the head of Great Britain’s largest pawnbroker, H&T.
But CEO John Nichols said the company was getting out of the payday loan market because it was no longer able to lend at lower interest rates, adding that H&T couldn’t afford to lend at 13% per month because the check was withdrawn warranty cards had a security layer removed.
“It is good [publicised] Wonga charges 30% -35% per month. We wouldn’t do that. When you ask someone, people say it’s ridiculous, “said Nichols.” At our courses it wasn’t a viable offer for this type of short-term loan. It was a relatively small part of our business.
“We believe that we are pawnbrokers.” Fast Deposit & Bad Credit Dedebt.Com
Nichols said H&T would replace payday loans with a new secured loan service.
Last month, 15 out of 50 payday lenders investigated by the Office of Fair Trading said they were leaving the industry after failing to demonstrate their lending practices were up to date. The sector is under investigation by the Competition Commission after the OFT identifies “ingrained” problems, including customers being caught by lenders whom they cannot afford to repay. Wonga’s interest rate is an APR of 5.853%.
Nichols said H & T’s withdrawal from payday loans was not due to new rules by the OFT and he supported attempts to regulate the industry.
He said there were 10 million people in the UK who couldn’t get conventional credit like a bank loan. “There is still demand for this loan and we have to provide it.”
Nichols’ comments came when H&T said trading in the second quarter of the fiscal year had been tough this year due to increased competition and a 25% drop in the price of gold, which reduced revenue by 23% in the first half. Pre-tax profit fell to £ 4.6 million from £ 7.5 million a year ago. Income from gold purchases fell from £ 27.3 million to £ 15.3 million.
Nichols said, “We took advantage of gold when it went up, and we did very well. It drove not only our expansion but many others. With the price of gold going down, your margin is being depressed and you have to bring that price down and you have.” the double effect that fewer people want to sell their gold. “
He said the gold boom lasted two years longer than expected and H&T had always planned with prices falling.
Investors weren’t prepared for the drop in earnings and the dividend cut, however, and in midday trading, the stock dropped 17% to 140.80 pence.
Pawnbroking boomed during the financial crisis as banks tightened lending and the price of gold skyrocketed. The number of stores has more than tripled since 2007 to 2,204 and total sales have increased from £ 300 million to £ 865 million, the National Pawnbrokers Association said.
H&T has also launched a new brand, Sona Loans, to provide loans to the “wealthy” Asian community. Nichols said this means lending in exchange for gold, which Indian and other Asian families traditionally receive as heirlooms or gifts.
“We’ve always had a good chunk of our business from the Asian community and we felt it was time to open up stores more to their way of thinking.”
Sona opened its first store in Southall, west London, over the weekend and typically charges 137% interest per year, the website says.