The Advertising Standards Authority has banned a TV advert from payday lender Wonga after ruling that it confused the public about interest rates applied to the firm’s short-term loans.
The ASA received 31 complaints about the advert, which features two puppets discussing the cost of a loan from Wonga.
In the advert, the puppets say: “Right, we’re going to explain the costs of a Wonga short-term loan.
“Some people think they will pay thousands of per cent of interest. They won’t of course – that’s just the way annual rates are calculated. Say you borrowed £50 for 18 days, it would cost you £33.49.”
Complainants challenged whether the ad was misleading because it confused people about the cost of the loan. Complainants also challenged the ad on the basis that the representative APR was irrelevant, and that the ad was irresponsible because it trivialised the decision to take out a short-term loan.
Wonga argued it had made the representative APR as prominent as possible in line with regulations, though admitted the example was not accompanied by the words “representative example”.
The ASA upheld the complaint on all grounds.
The ASA says: “Whilst we acknowledged that viewers taking out and repaying the loan within the stated time period would not repay 5853 per cent of the loan, we were nevertheless concerned that viewers would be left without a clear understanding of how the information in the on-screen text could be applied to a Wonga loan, given the ad’s assertion that the RAPR was not indicative of the cost of the loan.
“We considered that, though it attempted to clarify the costs associated with a Wonga loan, the ad created confusion as to the rates that would apply. On that basis, we concluded that the ad was misleading.”
Money Marketing sister publication Mortgage Strategy last month reported that Wonga chairman and founder Errol Damelin was believed to be stepping down from his position following increased political and public criticisms of both his firm and the wider payday lending industry.