Wonga branded 'morally offensive' for targeting students
Update 6.30pm: Wonga has now removed the page on student loans detailed in story below.
Payday loan firm Wonga is at the centre of outrage for encouraging students to take out one of its mega-expensive short-term loans to help finance their studies, in a "morally offensive" move.
When MoneySavingExpert.com creator Martin Lewis tweeted the news (see tweet below) this afternoon, the issue went ballistic and was trending in various areas of the country.
Anyone who falls for the firm's tricks, detailed on a page on Wonga's website, rather than relying on a standard student loan is likely to end up in mountains of debt – far more than using the traditional borrowing route.
A £300 Wonga loan paid back in 20 days costs £65 in fees. What's more, late payment fees can be massive. The firm's typical annual percentage rate (APR) is 4,214%.
As a crude comparison (though an APR is not the best way to measure a payday loan as you do not borrow the money annually), the current annual interest rate on a student loan is 1.5% for most.
Wonga says on its website: "A student loan is fine to help you pay for your university and living costs, but what about those times when you're waiting on money to come in and you need to buy or pay for something unexpected now?
"There's a totally new way of borrowing money to see you through until your next cheque and it's called Wonga.
"A Wonga loan is essentially a short-term loan that can help you manage your cash flow, without having to extend an overdraft or credit card even further, or get a large student loan."
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Not only may this encourage students into deeper debt, this misses the point that many students won't even have a pay cheque coming.
MoneySavingExpert.com asked Wonga to remove the page this afternoon. At 5.30pm, it said it "may do", adding the page was put up for 'SEO' purposes rather than to target students.
SEO stands for search engine optimisation. Many companies write articles on popular topics so they appear high in search engine rankings when web users look for information on subjects, such as student loans.
Martin says: "I find this morally offensive for a number of reasons. First the idea you should get a Wonga loan rather than a student loan is outrageous.
"Student loans only need repaying when you earn over £15,000 and the repayment is proportionate to income. They don't go on your credit file, there are no debt collectors.
"And the interest rate is never more than the rate of inflation – so there is no real cost to borrowing them. Compare that to Wonga's 4,214% APR.
"Next is the idea of marketing payday loans to students – trying to suck them in to this type of high cost credit at an early age.
"We already have a problem of a financially illiterate nation and no financial education in schools, so this smacks of high cost financial grooming.
"If Wonga truly believes it's one of the good guys among payday lending it should apologise and take this down from its site."
Twitter user MarkPentecost says: "Misleading guff from Wonga. Hope no students are taken in by this. Check the interest rates."
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