Wonga launches Paylater loans on retailer website
Payday loan company Wonga has launched a new Paylater service on furniture firm Cotswold Company’s website.
The service, which allows customers to “buy now, pay later” will be introduced on other retailers’ sites in the near future.
Although the Paylater branding is similar to Wonga’s, the Wonga name only appears in the small print.
A spokesman for Wonga said: “Essentially, Paylater is providing an alternative to credit cards.
“It takes the cost of your purchase, you pay an upfront fee of 7%, then there are three payments over subsequent months that cover the outstanding costs.”
With an annual percentage rate of 27.7% the cost of the service is substantially lower that the payday loans Wonga is better known for, which have an annual interest rate of 4,214 per cent.
The company has been criticised by consumer groups for leading people into a spiral of debt, and the Office of Fair Trading found that its debt collection practices could be aggressive and misleading.
Wonga is believed to be planning to float on the US stock market where it could be valued at £1 billion.
Labour MP Stella Creasy is campaigning against payday loan companies, saying they are no more than “legal loan sharks”.
The StepChange debt charity has warned that the number of people using payday loans this Christmas could double.
Earlier this month the charity revealed that in the first nine months of 2012, 25,476 people sought its help with payday loans compared with 17,414 in 2011.
Delroy Corinaldi, external affairs director of StepChange Debt Charity, said: “The dramatic rise in problem payday loan debt is alarming as this type of debt is expensive and can spiral out of control very easily.
“It is therefore crucial that anyone struggling to repay what they owe at the end of the month doesn’t keep rolling over their loan and racking up very high charges, but seeks advice from a debt charity instead.”