James Moore: Wonga? It's just an unnecessary evil

Outlook Moola, dosh, bread, one thing's quite clear: whatever you choose to call it, Wonga's positively rolling in the stuff, turning a profit of more than £1m a week by (to continue the slang theme) fleecing its customers.

But that's terribly mean of me. Wonga insists that it's transparent, and indeed it is. It tells its customers up front how much it is going to charge them, and then its entirely up to them to decide whether they want to get, well, ripped off.

That's something of a Hobson's choice because it's not as if the people reduced to calling upon its services have the option of seeking out cheaper alternatives. In this segment of the market, there is very little price competition, as the Office of Fair Trading has made clear.

Ah, say Wonga's defenders, you might not much like this industry but it's a necessary evil. There is a pressing need for companies that provide credit to those who would usually be shunned by mainstream lenders, which have (belatedly) got rather picky about who they'll lend to.

That is true, but only up to a point. Wonga's success was clearly demonstrated in the annual report it published yesterday (see how transparent we are). That success has been fuelled by a massive marketing campaign, ranging from cutesy TV ads to football sponsorships. As much as tapping into a demand, Wonga and its ilk, with their advertising muscle, have actually been creating a market that previously didn't really exist. It's all so easy, isn't it? Friends planning a night out when you're a bit strapped? Now you don't need to worry. A few clicks of a mouse and there's a couple of hundred quid for you.

The trouble is that borrowing at the prices charged by Wonga is almost never the right answer, because if you've a limited budget you really ought to be spending it on essentials (and yes, perhaps the odd luxury) rather than pouring your wonga into Wonga.

Maybe if you're one of Britain's army of freelancers, or workers on zero-hours contracts, Wonga loans could may sense if you need money for bills or food while you wait for payment, or hours (but let's at least have a price cap imposed on what Wonga can charge).

However, it isn't just people like this that Wonga is lending too, as the distressing stories from those that have found themselves on the wrong side of its loans demonstrate. Wonga is becoming a social evil, and despite what its defenders (who have been making their presence felt recently as it cranks up the PR effort) would have you believe, it is by no means a necessary evil.