Boris Johnson has warned of the dangers of getting into “irrational and unwise debt” just a day after it emerged he’d signed up short-term loan company Wonga.com to sponsor the capital’s free New Year’s Eve travel.
The company offers loans at the equivalent typical APR of 2689%, though the firm insists the short term nature of loans means no-one pays that level of interest.
Asked about the deal by LBC’s James O’Brien, the Mayor said “people should be aware of the extortionate rates of interest that they can charge” but insisted it was “perfectly acceptable” for Transport for London to work with the firm.
Yesterday the Mayor’s press office declined to comment on the issue, referring enquiries to TfL’s press office.
Today’s remarks by the Mayor follow condemnation of the sponsorship agreement by several London Assembly members including Green Party AM Jenny Jones who said “giving a platform to a loan company just as Londoners are hit by the January blues” was “stupid and dangerous.”
Labour has also been on the attack with AM Jennette Arnold calling the deal “shameful.”
Arnold added: “Debt and irresponsible, greedy lending brought the economy to the brink of collapse and yet Boris Johnson seems happy to encourage more poor people to get in more debt. These legal loan sharks prey on the vulnerable and have no place in our city. I’d encourage anyone who does have money trouble this Christmas to stay away from these people and go to Citizens Advice or a credit union.”
Labour Mayoral candidate Ken Livingstone has also condemned the deal, saying “While millions enter Christmas and the New Year with concerns over their jobs and family finances, our Conservative Mayor is busy plastering the capital with adverts for loans companies who profit from increasing the debts of the poorest in society.”
James: “There is some concern about your choice of the loans company Wonga as a key sponsor for Transport for London over Christmas and New Year. Ken Livingstone has had his abacus out and calculated a 2,689% APR on their loans and he suggests that it is perhaps not very wise of you to sell them prime-time advertising space on London’s buses and tubes.”
Boris: “Well, they’re a legitimate outfit and they are licensed to trade in this City and if they want to reduce the cost of travel for people in London then that seems to me to be something that is perfectly acceptable, but what I would say and I would stress this, anybody listening, people should be aware of the extortionate rates of interest that they can charge and people should not enter into irrational and unwise debt obligations.”
James: “You appreciate though that seeing it on the side of a bus or on a tube may actually camouflage what you’ve just described yourself as extortion.”
Boris: “Well, as I say, James, I think it’s very important that people are aware of the massive downside of getting exposed to debt on this scale and I will lose no opportunity to make that point.”
James: “And you’ll lose no sleep about the prospect of people not noticing and ending up in all sorts of bother as a result?”
Boris: “As I say there, they are a legitimate organisation. They’re licensed to trade in this country and in this City…”
James: “You know there’s legal and there’s moral.”
Boris: “They’re reducing the cost of transport in London for News’s Eve. I am concerned to ensure that people understand that entering into debt obligations of a kind they cannot afford is extremely unwise.”
Source: James O’Brien on LBC 97.3 www.lbc.co.uk