The following is the CCTA view on access to credit and the impact of aggressive regulation,  and over zealous and sometimes vexatious redress claims made by the Claims Management Companies. These and other factors are the cause of the ongoing operating problems being experienced by Wonga.

Access to responsible credit is required by the majority of consumers, to address short and longer term needs. As is much publicised the just about managing ( JAM’s ) consumers exist in most socio economic groups, with many families making ends meet until there is a crisis that needs a financial fix.

Unauthorised bank overdrafts cost more than many high cost credit loans, so short term credit products like Wonga provided the financial breathing space consumers required. A strong consumer lobby and political muscle produced severe FCA regulation that collapsed the business model for certain short term loan products – but not unauthorised Bank overdrafts. Added to this Claims Management Companies leapt on the back of the change in regulation and targeted short term lending as a potential area for mass claims based on affordability issues. The Industry is currently coping with a dual problem of excessive vexatious claims and the FOS acting as a regulator, rather than an impartial ombudsman service.

If the current scenario is allowed to continue consumers will be forced to find different routes to obtain financial assistance which may include the usage of illegal lenders, with the potential threat that comes with it. More than likely friends & family will be used, which is the fastest growing sector for access to credit. Borrowing from friends & family brings with it a degree of psychological pressure and potential family breakdown.

Politically there is little if no capital for politicians to suggest that a price for risk model works well for the consumer and business.