Friday, April 11, 2014
Wonga advert banned for saying 5853pc rate was 'irrelevant'
Wonga is a British payday loan company. It was making a fair point in its advertisement. The annual rate IS irrelevant to short-term customers
A Wonga advert has been banned for implying that the representative APR of 5853pc was "irrelevant".
The television ad for the payday loans company featured a conversation between two puppets, who said: "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 £150 for 18 days, it would cost you £33.49."
The Advertising Standards Authority (ASA) received 31 complaints that the ad confused viewers about the interest rate applied to a Wonga loan, implied that the representative APR was irrelevant to a short-term loan and was irresponsible because it encouraged consumers to disregard the representative APR and thereby trivialised the decision to take out a short-term loan.
Wonga said its objective had been to transparently explain the total "true" cost of a short-term Wonga loan.
SOURCE
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6 comments:
Actually based on those numbers alone (and assuming they are just interest and not other costs) the interest is pretty crazy.
The fact that most loans are only for short terms doesn't change the actual annual percentage rates charged so the ad actually is misleading.
Of course, if you are stupid or desperate enough to use payday lenders, you have to expect to get gouged.
Pay day lenders should be forced to provide details of what the interest rate will be on extended loans before they sign anyone up. The average person on the street using these sort of loans has no idea about compound interest and how it builds up.
The people who provide Payday loans expect a default rate of 25% of the loans they make with litte hope of ever recovering those defaults.
That's a very good reason for why they charge such an enormous rate for such short term loans, they provide loans to people that no other financial institutions would touch.
Most of the people who utilize these services do not have the math skills to understand even simplified explanations of how interest I charged. If you tell them that just the interest on their 100 currency unit loan is 5853 currency units per year they would just ask, “What is it for a couple of weeks?” It is just legalized thievery but better than the deal you will get from the true thieves.
MDH
Liberals want to destroy Kirsten Dunst now for speaking about traditional gender roles.
http://m.washingtonpost.com/blogs/she-the-people/wp/2014/04/10/kirsten-dunsts-latest-role-unlikely-warrior-in-continuing-gender-debate/
All they have done is make loan-sharking legal.
Now they actually have to pay taxes on the usurious rates.
This will only encourage illegal loan sharks with slightly lower rates (but your kneecaps as collateral).
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