Payday lending and football
From time to time we are pleased to welcome guest writers. We do not necessarily agree (or disagree) with what they say, but think they have an interesting point to make. This contribution is by Laura Susstance:
The Guardian newspaper ran an article last month detailing the open letter written by Northampton town supporter Bob Ward and his grandson, backed up by 18 additional football clubs, asking their football clubs to stop advertising the payday lender Wonga’s services. They believe that payday loans companies are targeting vulnerable people to take out expensive loans and argue that whilst it is currently legal in the UK, these practises have long been regulated in other countries such as the US and Europe, therefore they would not be permitted to carrying out the same practises in those countries.
It is interesting that football fans, who largely have a bad reputation for bad sportsmanship and violence, especially among our foreign counterparts, are actually taking the time and effort to show responsibility by campaigning for payday advertising to be banned from football. It is actually quite touching to hear the Bob Ward, the lead campaigner talk about the reasons behind his campaign:
"If they really wish to advertise short-term loans for their fans in these difficult financial times, then perhaps it would be better to give publicity to their local credit unions."
The message that you hear is that he is protecting his fellow fans from what he believes could be harmful short term loans which they might be vulnerable to due to the current economic situation.
Bob Ward and his supporters are objecting to the deal done between the UKs biggest payday lending site, Wonga and the Football League's digital subcontractor which ultimately gave Wonga access to advertising on up to 80 football clubs websites. This is huge advertising exposure for Wonga if you consider how many football fans would visit each of their clubs websites. A winning deal for Wonga, but not so much the young and impressionable football fans who might fall into their advertising trap.
Payday loans attract bad press thanks to their terms and conditions and ‘laissez-faire’ attitude to accepting loan applications. Wonga (and other payday lenders) are largely unregulated at present which means that there is no cap on loans, therefore a customer can take out a loan at 1737% and if they cannot afford to repay the loan after one month, they can roll it over. Every time they do this, they incur another interest fee and some loans end up incurring a total of 16,000% interest which is then impossible to repay.
Furthermore, there is currently no cap on the number of payday loans a customer can request and also no credit checks therefore many people who have existing payday loans request another from another firm, simply to repay their first lender. This situation is likened to ‘financial quicksand.’ As there are no credit checks, the lender does not do anything to ensure that their customer has the capacity to repay the loan in the first place which leaves the customer open to a vulnerable situation.
If you consider that Wonga's advertising budget has increased from £22,000 in 2009 to £16 million in 2011, its easy to see how popular this type of loan has become and how much money they have made from their questionable services. It remains to be seen whether Bob Ward and his supporters can campaign successfully against payday heavyweights, Wonga to remove their advertising from their football club websites.