Ed Miliband Takes On The 'Wonga Economy'

The Labour leader has launched an attack on our "Wonga economy" saying payday lenders are "running riot through our communities".

Ed Miliband accused the firms of preying upon vulnerable people then intimidating them with bullying tactics when they failed to repay the loans.

He said they had created a "quiet crisis" for thousands of households saddled with debts they were unable to pay off.

In a speech at Battersea Power Station, Mr Miliband said that he had visited the Citizens' Advice Bureau in his Doncaster constituency and heard the stories of a number of people who had become victims of pay day loan firms.

He had spoken to one young mother who was "down to her last nappy" when she saw an advert for a payday lender on the television. He said she had succumbed to the financial pressures to take one.

Now, he said, the "bullying and harassment" she was being subjected to by those firms was such that she had been forced to give her mobile phone to her mother because she was getting 15 calls a day.

The payday loans firm, Wonga, has 1.25 million customers

His intervention came as representatives of the three of the biggest payday lenders - including Wonga - were facing a grilling by MPs on the Commons Business, Innovation and Skills Committee.

Mr Miliband responded angrily to the boss of Wonga, who has commissioned a film which tells the story of 12 people who have been happy with their payday loans, claiming he was speaking for a "silent majority" who were satisfied with the service.

He said: "Payday lenders don't speak for the silent majority. They are responsible for a quiet crisis of thousands of families trapped in unpayable debt.

"The Wonga economy is one of the worst symbols of this cost of living crisis."

He said that seven out of ten customers customers said that they regretted taking out a payday loan, with half saying they were unable to repay it.

Wonga has come under attack from the Archbishop of Canterbury

He said the woman who ran his local Citizens' Advice Bureau had told him: "Payday lenders are running riot through this community."

However, Henry Raine, head of regulatory and public affairs at Wonga, said that around one in 33 (3%) customers took loans out for at least 60 days, meaning interest was frozen.

He said: "Wonga's business is aiming to lend to people who can pay us back, that's how we make money.

"The vast majority of people pay us back on time. We freeze interest after 60 days and 25% of people pay us back early."

Mr Raine said around 3% of loans, equating to around 40,000 of Wonga's 1.25 million customers, go to the 60-day period.

He said Wonga's record compared favourably with the rest of the loan industry, including credit card companies and banks.

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