A television advert by payday lender Wonga has been banned by regulators after it failed to show its interest rates on lending.
The Advertising Standards Agency (ASA), with the backing of Citizens Advice, told Wonga that the advert must not appear again in its current form. The advert featured a man jotting down figures on a napkin before using a calculator on his phone to tally up how much he owed. Citizens Advice stated that by failing to show the loan's interest rate it was in breach of regulations.
Members of Citizens Advice noted that in the advert an elderly tells the man "you appear to be in a financial quandary, young fellow. At Wonga you chose exactly how much to borrow and for how long," adding "you can even pay back early and save money". The advert closes with a "wonga.com" banner being screened but fails to mention the 5,853 per cent annual interest rate on the loan.
The ASA said the promotion was in breach of its code because the phrase "you appear to be in a financial quandary" implied that a payday loan could be a viable option for non-essential purposes. It also noted that by saying consumers could "save money" the advert implied that there was some kind of incentive scheme.
Following the ruling, Gillian Guy, chief executive of Citizens Advice, said: "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 banning comes after Wonga announced that it would be writing off £220 million of debts for 330,000 consumers. The payday lender stated that it will be putting new affordability checks in place. It is expected to be introduced later in the month and will see a further 45,000 customers in arrears having the interest on their loans wiped out.
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