Jim Duffy comment: Payday loans and the minimum wage generation

Wonga, the payday loans ­company, is not in good shape, it seems. Reports ­suggest it may be close to collapse.

For many, the need to turn to companies like Wonga is a reality and a necessity, says Duffy. Picture: Ian Howarth.

The question is – would you give Wonga a ­payday loan to bail it out?

The term “payday loan” was never truly adopted as wholesome and positive. The whole point of a payday loan was a quick fix for folks who were a little short and needed to bridge a gap in their finances. At least that was the way it was spun by the marketing teams.

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But, with huge interest rates that were crippling to borrowers, these loans were neither quick fix nor enabling. Hence the backlash and claims against Wonga that has cost it dear. But, right now, I have a payday loan dilemma of my own. I have a family member who is in dire straits [as she sees it] and needs a cash injection to get her through. The issue I have is – do I tell her to go to the likes of Wonga or do I become her payday lender?

Like many of you as parents with sons or daughters at college, university or starting work, I find myself wondering how on earth young people these days are ­supposed to get by. Notwithstanding they buy silly things like coffees from Costa and Starbucks at exorbitant prices, when a jar of decent instant costs the same as one of these specialist coffees. Putting aside that when they do go out with their peers, they tend to hype it up a bit, ordering cocktails at an average of eight quid a head. And forgetting that they like the most recent and up-to-date mobile phones that make the likes of Apple shareholders very happy, then in all honesty these late teenagers and early 20-somethings are genuinely struggling.

My own daughter decided to leave ­university after the third month. She felt that the course she had chosen was not for her and that she wanted to go into the world of work, gain some real-life experience, then re-enter university having a ­better perspective on what she wanted to do. I thought this very mature and ­supported her in her decision. Uni is not the be all and end all and is certainly not for everyone right out of school.

Having made the decision to hit the jobs market, my daughter quickly secured a contract with a national jeweller. She got an eight-hour contract and was full of enthusiasm in her new role. In fact, she was top of the monthly sales charts for months. But, despite enjoying her new role and showing keenness to progress and up-sell, she was, and is, permanently skint. On a monthly basis she brings in about £500, which just about clears her running costs. She bought a second hand car on credit so she could be mobile and move about stores as and when needed. She got the cheapest insurance a 20-year-old can get at £80 a month and she pays a small amount of “dig money” to show willing. Add all of this together and she is left with pennies.

So what now? Bank of mum and dad? Wonga? Some other loan company?

So many of our young people today are in this situation. The are securing only enough hours to get by from week to week. And I’m torn on what to do… do I bridge the gap with a loan each month? Do I simply support her with a hand-out? Or do I tell her to try even harder and get a paper round before her work starts and then a bar job in the evenings?

My daughter is lucky in that she will not be evicted for not paying her rent. But for many, the need to turn to companies like Wonga is a reality and a necessity. Wonga may go down the tubes without its own payday loan, but the need to support those on minimum contracts remains. So, some other business model will fill the gap. But, this is just a sticking plaster on the minimum wage generation that makes the bank of mum and dad, where available, even more relevant and needed.

Wonga addressed a need. The need is still there. But can we find a better and fair way to nudge along those who are caught in the chasm of zero hours and minimum wage?

Jim Duffy MBE, Create Special.