Simon Read: Need cash? Need an APR of 4,214 per cent? Welcome to Newcastle's new sponsor Wonga
Wonga is Britain's biggest payday lender, although it doesn't like to be called that. Instead, it says it offers short-term, high-cost credit.
It lends up to £1,000 a time for up to 30 days and quotes a representative APR, or annualised percentage rate, of 4,214 per cent. But the firm claims that eye-watering figure is irrelevant, as it does not lend over a year.
Yesterday on its website it quoted the cost of borrowing £400 for 30 days as £125.48. That means having to pay back £525.48 – a hefty wedge for someone who may have borrowed the money in an emergency. Figures like that are why payday lenders come in for so much criticism.
The Office of Fair Trading is now investigating the whole sector amid accusations that payday lenders target vulnerable people and encourage them into a spiral of debt they cannot afford to repay by allowing them to roll over loans, month after month, until the total owed is much more than the amount originally borrowed.
Wonga claims it restricts the number of rollover loans and does not target the unemployed or students.
But it has made huge profits on the back of its proposition of easy money. Wonga's accounts published at the end of last week revealed the firm made pre-tax profits of £59.2m in 2011 – more than four times the 2010 figure of £14.1m, showing how a short-term lender can cash in on people struggling to survive during the recession.
Its existing shirt sponsorship of Blackpool appears to be aimed at improving brand recognition in an area of high poverty. The fact that its new deal is in a similarly depressed area seems to be unsurprising.
Latest in Sport
Diego Costa injury: Chelsea striker a doubt for Everton match due to muscle injury
Mario Balotelli posts hilarious Beatles picture on Instagram as he awaits Liverpool debut
Arsenal transfer news: Arsene Wenger says he will be 'actively involved' on deadline day... but may not buy a striker despite Giroud injury
Arsenal vs Besiktas player ratings: Alexis Sanchez? Jack Wilshere? Mesut Ozil? Who was the star man at the Emirates Stadium?
Champions League draw: Liverpool meet Real Madrid, but should they fear facing the reigning champions?
- 1 Ashya King missing: Police hunt five-year-old boy with brain tumour snatched from Southampton hospital by his parents
- 2 Notting Hill Carnival: Woman shares selfie after being ‘punched in face for telling man to stop groping her’
- 3 Daily Show's Jon Stewart destroys Fox News for its Ferguson coverage
- 4 Botched ice bucket challenge leaves man critically injured after plane drops hundreds of gallons of water
- 5 Friends reunion: Jennifer Aniston, Lisa Kudrow and Courteney Cox perform mini sketch on Jimmy Kimmel Live
Exclusive: We share blame for creating 'jihad generation', says Muslim strategist
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage