Struggling payday lender Wonga’s week just got worse – one of its television ads has been banned for failing to disclose the cost of borrowing.
The news follows hard on the high-cost credit company being forced to write-off around £220m of debt to 330,000 borrowers it should never have lent to. Last week it was forced to reveal that profits have slumped by 53 per cent.
New chairman Andy Haste was forced to admit that the firm will get smaller and less profitable while rumours circulated that it may resort to changing its name to escape the whiff of scandal associated with the Wonga brand.
The banned ad featured a man scribbling down figures on a napkin before checking his phone calculator and seeing the amount £153.79.
An elderly woman then said: "You appear to be in a financial quandary, young fellow. At Wonga you choose exactly how much to borrow and for how long," and then she added: "You can even pay back early and save money."
Citizens Advice complained that the ad breached regulations by omitting the representative annual percentage rate, as it understood that the claim "you can even pay back early and save money" was an incentive likely to trigger the requirement to disclose it.
The Advertising Standards Authority said: "We considered that this was an incentive to apply for credit, and that the RAPR should therefore have been disclosed."
It ruled that the ad must not appear again in its current form, adding: "We told Wonga to ensure that future ads that included a comparison or incentive displayed the representative annual percentage rate."
The ad was just one of five payday loan adverts that had been banned after Citizens Advice reported them to the ASA. Others were from Peachy, Loan Monarch, Spends4u and Pounds To Pocket.
Citizens Advice chief executive Gillian Guy said: "Payday loan adverts that break the rules should be taken off the air. Adverts must be clear about what taking out a loan means and how much it will cost. The consequences are really serious when payday lending goes wrong. High interest rates and fees can mean that a small loan balloons into a huge debt.
"The ASA is right to take these steps to ban ads that are not up to scratch. With five out of the seven adverts we reported to the ASA now banned, both the advertising and payday loan industries need to look at why so many adverts are not meeting the grade and change their ways.
"Anyone concerned about the content of a payday advert can report it to Citizens Advice or the ASA directly."Reuse content