Wonga TV ad banned for not mentioning 5,853% interest rate
A Wonga TV ad has been banned by the UK’s Advertising Standards Authority (ASA) after a charity complained it does not mention that the loan’s interest rate is 5,853% per year.
The payday lender’s ad, which features a man noting down figures on a napkin before double checking on his smartphone calculator, does not reveal the loan’s interest rate, Citizens Advice argued, which is a breach of regulations.
The advert, where a pensioner puppet appears telling the man “You appear to be in a financial quandary, young fellow,” cannot appear again in its current form, the ASA ruled.
“The ad must not appear again in its current form. We told Wonga to ensure that future ads that included a comparison or incentive displayed the RAPR.”
According to the ASA, the advert breached regulations because it claimed that borrowers could would save money – a statement which could be interpreted as a claim that its loans were cheaper than the competition’s. As Wonga’s ad pointed to a price comparison, it should have disclosed its RAPR (representative annual interest rate) of 5,853%.
In April 2014, another Wonga advert was banned after the ASA received complaints that it suggested a high annual interest rate did not matter.
The ASA banned several payday lender adverts for breaching advertising codes in July 2014.
Since Wonga’s new chairman Andy Haste joined the company in June 2014, it has not placed any TV ads.
£220 millions’ worth of debts written off
Last week, Wonga said it was writing off debts worth £220 million involving 330,000 customers. Since new affordability checks have come into force, those customers would not have had their loans approved. They are all at least thirty days behind on their interest payments.
The payday lender added that 45,000 more customers who are up to 29 days behind on the payments will not have to pay charges or interest. They will also be given a longer period to pay their debts back.
Wonga announces profits fall
In September, Wonga announced that its profit for 2013 declined by 53% to £39.7 million due to ‘remediation costs’, which is a euphemism for having to pay refunds for mistakes the company had made.
The company warned that since new regulations were introduced, the business will become “smaller and less profitable.”
Video – The banned Wonga advert
This is the advert the ASA has banned.