Yahoo Finance Wonga Advertisement Banned By Watchdog ASA
A television advertisement for payday loan firm Wonga has been banned by the advertising watchdog.
The Advertising Standards Authority (ASA) ruled that it led to confusion about interest rates charged by the firm.
The ASA received 31 complaints about the commercial but Wonga denied it was misleading, and insisted it followed industry regulations.
It upheld the complaints and said the advertisement must not reappear in its current form.
The advert was based on a discussion about short-term loan costs between two puppets.
The script downplayed the full-year annual percentage rate (APR), giving an example that if £50 was borrowed for 18 days it would cost £33.49 in interest payment.
The ASA said: "Whilst we acknowledged that viewers taking out and repaying the loan within the stated time period would not repay 5,853% 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 representative APR 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."
The payday loan sector has come under increasing scrutiny.
On April 1, the Financial Conduct Authority (FCA) assumed oversight responsibility for the consumer credit market.
The City regulator's role was started after it was revealed 60% of complaints to the Office of Fair Trading were about how debts were collected.
Previous analysis by the Competition Commission found firms issued around 10.2 million loans a year, worth £2.8bn.
Research also showed that more than a third of all payday loans are repaid late or not at all annually.
FCA said new rules such as limiting the number of times a payday loan can be rolled-over to two, the banning of misleading adverts and compulsory affordability checks for all loan applicants would be implemented.
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